What changed
RBI introduced a formal Framework for acceptance of Green Deposits, effective June 1, 2023. It defines green deposits, green finance, and greenwashing, and mandates that proceeds be allocated to specified green activities/projects. The framework applies to scheduled commercial banks (excluding RRBs, LABs, payments banks) and all deposit-taking NBFCs including HFCs.
What it means for you
Banks must now offer green deposits with clear terms, ensuring funds are used for genuine green projects. This protects depositors, supports India's climate goals, and curbs greenwashing. Lenders need to align their product offerings and internal processes to track and report green fund allocation.
What you must do
- Update product documentation and terms for green deposits to comply with the framework by June 1, 2023.
- Establish internal systems to earmark and track green deposit proceeds for eligible green activities/projects.
- Train staff on greenwashing risks and the definition of green activities as per RBI guidelines.
- Review and align existing green deposit offerings with the new framework's requirements.
- Prepare for regulatory reporting on green deposit acceptance and fund allocation.
Who it affects
Scheduled Commercial Banks including Small Finance Banks (excluding RRBs, LABs, Payments Banks), Deposit-taking NBFCs including HFCs
What is a green deposit as per RBI?
A green deposit is an interest-bearing fixed deposit whose proceeds are earmarked for allocation to green activities/projects that meet RBI's prescribed criteria, contributing to climate risk mitigation or environmental objectives.
When does this framework take effect?
The framework comes into effect from June 1, 2023, and applies to all scheduled commercial banks (excluding RRBs, LABs, payments banks) and deposit-taking NBFCs including HFCs.
What is greenwashing and how does the framework address it?
Greenwashing is marketing products as green when they don't meet the defined criteria. The framework addresses it by requiring clear definitions and earmarking of funds, ensuring only genuine green activities are financed.