Green Deposits | 23 Dec 2024

Green deposits in India face sluggish adoption due to pricing issues, low public engagement, and limited interest from private banks.

Green Deposits: These are interest-bearing deposits earmarked for funding green projects, such as solar energy, clean transportation, and sustainable water management.
- In June 2023, the Reserve Bank of India’s (RBI) introduced a framework for green deposits to promote sustainable investments.
  - However, banks like SBI have seen limited uptake, as the interest rates are not competitive with regular deposits.
Challenges in Green Deposits: Low interest rates for green deposits compared to regular deposits discourage potential customers.
- Banks struggle with defining which activities qualify as “green” and the overall lack of a clear framework for green investments.
- The CRR (Cash Reserve Ratio) requirement for green deposits is higher, which could be a barrier to attracting more customers.
India’s Commitment to Green Deposits: India aims for carbon neutrality by 2070, with green finance pivotal in this transition.