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The Reserve Bank of India (RBI) on Tuesday said regulated entities (REs) can accept green deposits denominated only in rupees and allocate the proceeds to eligible green activities/projects.
In its Framework for acceptance of Green Deposits by REs (All Scheduled Commercial Banks including Small Finance Banks and all Deposit taking Non-Banking Finance Companies, including Housing Finance Companies), RBI said REs can accept green deposits as cumulative/non-cumulative deposits.
Experts opine that for a retail depositor, it will make no difference whether they place a green deposit or a normal deposit (if both have callable/ premature withdrawal option) as a bank has to offer a uniform rate of interest on all retail deposits.
Bulk deposits
However, banks may try to lure retail depositors with non-callable green deposits as they can offer slightly higher interest rates. But retail depositors will not want to lose the flexibility of premature deposit withdrawal.
It is only in the case of bulk deposits that banks have the flexibility to offer interest rates higher than the card rates. So, banks may pitch the green deposits to bulk depositors.
Banking expert V Viswanathan emphasised that the interest rate has to be higher to attract resources under green deposits.
“Both -- differential interest rate and non-callable (no premature closure) -- are possible only under bulk deposits (of ₹2 crore and above).
“So, Green deposits will be mobilised from bulk depositors, who may be individuals, NRIs, or firms/institutions,” he said.
Financing green projects
Viswanathan opined that exempting green deposits from statutory reserve ratios or Liquidity Coverage Ratio or counting financing of green activities/projects as priority sector lending would encourage banks to mobilise these deposits and lend for green projects.
RBI said the proceeds raised through green deposits have to be used to finance 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.
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