Facts for Prelims (FFP)
Source: RBI
Context: The Reserve Bank of India clarified that banks and NBFCs are not obligated to raise green funds.
What are Green Funds/Deposits?
Green funds refer to financial resources (interest-bearing deposit) specifically earmarked for environmentally sustainable projects and activities. These funds are designed to support initiatives that contribute to ecological well-being, such as renewable energy, green transport, and eco-friendly construction.
What are REs?
Regulated Entities (REs) are financial institutions and organizations operating in the financial sector that fall under the regulatory purview of a central authority, such as the Reserve Bank of India (RBI).
REs under the Framework for acceptance of Green Deposits include:
- Scheduled Commercial Banks including Small Finance Banks (excluding Regional Rural Banks, Local Area Banks, and Payments Banks)
- All Deposit-taking NBFCs registered with the RBI
- Housing Finance Companies (HFCs)
Other aspects of Green Deposits are:
- Green deposits in India must be in Indian rupees. The framework aims to encourage green financing and address concerns, supporting the flow of credit to eco-friendly projects.
- Sectors included are Renewable Energy, Energy Efficiency, Clean Transportation, Climate Change Adaptation, Sustainable Water and Waste Management, Green Buildings, etc.
- Exclusions (don’t come under Green Deposit framework): Projects involving new or existing extraction, production and distribution of fossil fuels; Nuclear power generation; Direct waste incineration; Landfill projects; Hydropower plants larger than 25 MW, etc.
- Monitoring: Green deposit funds are subject to independent third-party verificationon an annual basis.
