Framework For Acceptance Of Green Deposits For Regulated Entities In India 

Posted On - 1 May, 2023 • By - Yashita Muthamma

In recent years, there has been a growing concern about the environmental impact of various industries, including the financial sector. In response, many regulatory bodies worldwide have started implementing policies to encourage more sustainable practices in the financial sector. In India, the Reserve Bank of India (RBI) has introduced a framework for the acceptance of green deposits for regulated entities, aimed at promoting sustainability in the banking industry. 

Green deposits are a type of deposit that are made by customers to support sustainable and environmentally friendly projects. The RBI’s framework provides guidelines for the acceptance of such deposits by regulated entities, including banks, non-banking financial companies (NBFCs), and small finance banks. 

Under the framework, regulated entities are allowed to accept green deposits that are certified by recognized external agencies. These agencies are responsible for assessing the environmental impact of the projects that the green deposits will be used to fund. The framework also requires regulated entities to maintain a separate account for green deposits, which should be audited by an external auditor on an annual basis. 

Regulated entities that wish to accept green deposits must first obtain approval from the RBI. They must also comply with certain requirements, such as maintaining a minimum net worth and ensuring that the funds raised from green deposits are used only for sustainable and environmentally friendly projects. In addition, regulated entities must disclose information about the green deposits they have accepted, including the projects they have funded, on their website and in their annual reports. 

The RBI’s framework for green deposits is an important step towards promoting sustainability in the banking industry. It provides a mechanism for customers to support environmentally friendly projects, while also ensuring that regulated entities are held accountable for the use of these funds. By requiring external certification and annual audits, the framework also helps to maintain transparency and accountability in the acceptance and use of green deposits. 

Overall, the RBI’s framework for the acceptance of green deposits is a positive development for the Indian financial sector. It aligns with the growing global trend towards sustainable finance and demonstrates the RBI’s commitment to promoting environmentally friendly practices in the industry. As more customers become aware of the option to make green deposits, it is likely that the framework will encourage more investment in sustainable projects and contribute to a more sustainable future for India.