The Reserve Bank of India has introduced a framework of rules, governing acceptance of green deposits by Indian financial services companies. The framework will come into effect from June 1, 2023.
It has been introduced with the objective to "encourage regulated entities, to offer green deposits to customers, protect interest of the depositors, aid customers to achieve their sustainability agenda, address greenwashing concerns and help augment the flow of credit to green activities/projects," RBI said in the framework note released on Tuesday.
The framework will apply to all scheduled commercial banks, including small finance banks and deposit-taking non-banking finance companies such as housing finance firms.
The entities will issue green deposits as cumulative or non-cumulative deposits. On maturity, they can be renewed or withdrawn. The green deposits shall be denominated in Indian rupees only.
The allocation of funds raised from green deposits will be based on the official Indian green taxonomy, that is yet to be finalised. However, as an interim measure, REs shall be required to allocate the proceeds raised through green deposits in the following categories:
Renewable energy.
Energy efficiency.
Clean transportation.
Climate change adaptation.
Sustainable water and waste management.
Pollution prevention and control.
Green buildings.
Sustainable management of living natural resources and land use.
Terrestrial and aquatic biodiversity conservation.
Nuclear power generation, direct waste incineration, landfill projects and hydropower plants larger than 25 MW are among the uses that are prohibited using funds raised via green deposits.
"The allocation of funds raised through green deposits by REs during a financial year shall be subject to an independent Third-Party Verification/Assurance, which shall be done on an annual basis," it said.
The REs, with the assistance of external firms, will also annually assess the impact associated with the funds.
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