RBI?s regulations on Green Deposits

RBI’s regulations on Green Deposits

News: The Reserve Bank of India(RBI) has come up with a regulatory framework for banks to accept green deposits from customers.

What are Green Deposits?
 Green deposits are more or less the same as regular deposits that banks accept from their customers. The only major difference is that banks promise to earmark the money that they receive as green deposits towards environment--friendly projects.
 For example, a bank may promise that green deposits will be used towards financing renewable energy projects, technology that help overcome climate change.
 The regulatory framework is aimed at preventing greenwashing, which refers to making misleading claims about the positive environmental impact of an activity.

What does RBI’s regulatory framework on green deposits provide for?
 Banks will have to come up with a set of rules or policies approved by their respective Boards that need to be followed while investing in green deposits from customers. These rules need to be made public on the banks’ websites.
 The banks will be required to disclose regular information about i) The amount of green deposits received, ii) Deposits allocated towards various green projects and iii) The impact of such investments on the environment.
 A third -party will be required to verify the claims made by banks regarding the projects in which the banks invest their green deposits.
 RBI has also come up with a list of sectors that are eligible to receive green deposits. It includes renewable energy, waste management, clean transportation, energy efficiency, and afforestation.

What impact is the framework likely to have?
 Depositors who care about the environment may get some satisfaction from investing their money in environmentally sustainable investment products. But there are challenges since the bank is only able to invest in a certain number of projects with green funds.
 When it comes to protecting the environment, green investing enthusiasts believe that putting money into green projects may be one of the best ways to help the environment. However, critics argue that green investment products are often just a way to make investors feel good about themselves and that these investments don’t really do much good to the environment.

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