A. Introduction
RBI has issued the Framework for acceptance of Green Deposits on April 11,2023. This document
outlines a framework for the acceptance of green deposits by regulated entities (REs) such as
scheduled commercial banks and deposit-taking non-banking financial companies (NBFCs) in India.
The purpose is to incentivize these entities to offer green deposits, safeguard depositors’ interests,
support customers in achieving sustainability goals, address concerns related to greenwashing, and
boost credit flow to environmentally friendly activities/projects.
B. Recent Development
The Reserve Bank of India (RBI) has recently issued a set of Frequently Asked Questions (FAQs) to
provide clarity on the guidelines for green deposits. The key points from the FAQs are as follows:
| Question | Summary |
| 1. Mandatory for Reporting entities (REs) to raise green deposits? | Not mandatory, but if they choose to, they must follow the prescribed framework. |
| 2. Differential interest rates on green deposits? | Not permitted as per existing guidelines; interest paid as agreed, irrespective of fund allocation. Also, there is no restriction on premature withdrawal. |
| 3. Investment of unallocated proceeds and penalties? | Liquid instruments with max maturity of one year allowed. No penalty specified but subject to supervisory review. |
| 4. Classification under priority sector and Sovereign Green Bonds? | Green activities can be classified under priority sector if they meet RBI guidelines. Sovereign Green Bonds align with framework projects. |
| 5. Overdraft facility against Green Deposits? | Allowed subject to specified instructions in the Consolidated Circular on Opening of Current Accounts and CC/OD Accounts by Banks. |
| 6. Eligibility criteria for external review? | REs can engage any reputable domestic/international agency for external review. |
| 7. Publishing of Financing Framework (FF)? | FF with external reviewer’s opinion needs to be published on the RE’s website before implementation; no need for a second publication after external review. |
| 8. Denomination of green deposits? | Only allowed in Indian Rupees as per the current framework. |
