Green deposits are a unique financial product offered by regulated entities like banks and financial institutions. These deposits bear interest and are specifically aimed at financing environmentally friendly projects. The core objective of green deposits is to channel funds toward activities that contribute to climate change mitigation and other environmental goals.
Green deposits can be offered by scheduled commercial banks, with the exception of Regional Rural Banks, Local Area Banks, and Payments Banks. Additionally, all deposit-taking Non-Banking Financial Companies (NBFCs) registered under the Reserve Bank of India, including Housing Finance Companies, are eligible to offer these deposits.
The funds collected through green deposits are allocated to a variety of environmental projects. These include renewable energy initiatives such as solar, wind, and biomass energy projects, improvements in energy efficiency, clean transportation infrastructure like electric vehicle charging stations, and sustainable waste management practices. The selection of these projects is based on their alignment with predefined criteria for green activities.
Regulated entities are required to establish a comprehensive Financing Framework. This framework outlines the eligible green activities and projects and includes processes for project evaluation, selection, ongoing monitoring, and third-party verification. Such measures ensure transparency and compliance with green objectives.
To prevent greenwashing, regulated entities must adhere to stringent guidelines. These guidelines necessitate the disclosure and verification of how green deposit funds are utilized. This involves third-party verification and detailed reporting on the fund allocation and the environmental impact of the financed projects.
Regulated entities are obligated to provide an annual report to their Board of Directors. This report should cover the amount raised through green deposits, the list of financed projects, and their impact. Furthermore, specific disclosures regarding the use of green deposit funds must be included in the Annual Financial Statements.
To ensure public transparency, regulated entities are required to make their Financing Framework, third-party verification reports, and impact assessment reports available publicly, typically on their official websites. This transparency allows depositors and stakeholders to assess the environmental benefits and outcomes of their investments.
These insights provide a comprehensive understanding of green deposits and the regulatory measures in place to ensure their effective use in promoting environmental sustainability.
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