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GREEN DEPOSITS



  May 09, 2024

GREEN DEPOSITS



Q1: What are green deposits?

A1: Green deposits are interest-bearing deposits collected by regulated entities (REs), such as banks and financial institutions, with the purpose of financing environmentally friendly projects. The funds from these deposits are allocated specifically to support green activities that contribute to climate change mitigation and other environmental objectives.

Q2: Who can offer green deposits?

A2: Green deposits can be offered by scheduled commercial banks (excluding Regional Rural Banks, Local Area Banks, and Payments Banks) and all deposit-taking Non-Banking Financial Companies (NBFCs) registered under the Reserve Bank of India, including Housing Finance Companies.

Q3: What kinds of projects are financed using green deposits?

A3: The funds from green deposits are allocated to various environmental projects, such as renewable energy initiatives (solar, wind, biomass), energy efficiency improvements, clean transportation (electric vehicle infrastructure), and sustainable waste management, among others. These projects are selected based on their ability to meet the defined criteria for green activities.

Q4: How do REs ensure the green deposits fund appropriate projects?

A4: REs are required to establish a comprehensive Financing Framework that outlines the eligible green activities/projects. This includes a detailed process for project evaluation and selection, ongoing monitoring, and third-party verification to ensure transparency and compliance with the green objectives.

Q5: What measures are in place to prevent greenwashing?

A5: To combat greenwashing, REs must adhere to strict guidelines that require the disclosure and verification of how green deposits are used. This includes third-party verification and detailed reporting on the allocation of funds and the environmental impact of the financed projects.

Q6: Are there any specific reporting requirements for green deposits?

A6: Yes, REs must provide a detailed report annually to their Board of Directors, covering the amount raised through green deposits, the list of projects financed, and the impact of these projects. Additionally, they must include specific disclosures in their Annual Financial Statements regarding the use of green deposit funds.

Q7: How is the public informed about the use and impact of green deposits?

A7: REs are required to make the Financing Framework, third-party verification reports, and impact assessment reports publicly available, typically through their official websites. This ensures transparency and allows depositors and stakeholders to review the environmental benefits and outcomes of their investments.

These FAQs provide a basic understanding of green deposits and the regulatory framework designed to ensure their effective use in promoting environmental sustainability.


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