Circular no. RBI/2023-24/14 DOR.SFG.REC.10/30.01.021/2023-24, dated … Continue reading “RBI Releases Framework for Acceptance of Green Deposits by Regulated Entities”
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Circular no. RBI/2023-24/14 DOR.SFG.REC.10/30.01.021/2023-24, dated 11.04.2023
The RBI has released a framework for acceptance of Green Deposits by Regulated Entities (REs) to encourage them to offer green deposits to customers. The objective is to protect the interests of depositors, aid customers to achieve their sustainability agenda, address greenwashing concerns and increase the flow of credit to green activities/projects. The framework shall be effective from June 1, 2023.
The provisions shall be applicable to the following entities, collectively referred to as regulated entities (REs):
(a) Scheduled Commercial Banks including Small Finance Banks (excluding Regional Rural Banks, Local Area Banks and Payments Banks) and
(b) All Deposit taking Non-Banking Financial Companies (NBFCs) registered with the RBI including Housing Finance Companies (HFCs) registered under section 29A of the National Housing Bank Act, 1987.
The framework allows REs to issue green deposits as cumulative or non-cumulative deposits. On maturity, the green deposits will be renewed or withdrawn at the option of the depositor. The green deposits shall be denominated in Indian rupees only.
Further, REs are required to put in place a comprehensive Board-approved policy on green deposits, laying down all aspects in detail for the issuance and allocation of green deposits. A copy of the policy on ‘Green Deposits’ should be made available on the RE’s website.
Also, the allocation of funds raised through green deposits by REs during a financial year shall be subject to an independent third-party verification or assurance which shall be done on an annual basis.
The third-party assessment would not absolve the REs from their responsibility regarding the end-use of funds for which the laid down procedures of internal checks and balances would have to be followed as in the case of other loans.
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