India backs green investment

The Reserve Bank of India is extending the range of banks and other regulate entities (REs) who can raise ‘green deposits’ to finance green activities and projects. The idea is to foster and develop a green finance ecosystem in the country, the central bank said.

A green deposit means an interest-bearing deposit, received by the RE for a fixed period and the proceeds of which are earmarked for being allocated towards green finance. According to the Economic Times, some RBI-regulated financial entities like banks already offer green deposits and ‘green finance’ is gaining traction in India.

The framework is intended to ‘encourage REs 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,’ the RBI said in a press release.

‘As per the framework, REs shall be required to allocate the proceeds raised through green deposits towards the following list of green activities/projects which encourage energy efficiency in resource utilisation, reduce carbon emissions and greenhouse gases, promote climate resilience and/or adaptation and value and improve natural ecosystems and biodiversity.’

Qualifying projects include waste incineration, landfill projects and renewable energy schemes generating energy from biomass. The new regime starts on 1 June.

RBI says the scale, interest rate and other terms and conditions (as applicable to the RE) are defined by the bank. The allocation of funds raised through green deposits by REs during a financial year is subject to an annual independent third-party verification/assurance.

‘The third-party assessment would not absolve the RE of its 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,’ the framework states.