The RBI made it clear that banks and NBFCs are not required to raise green money

 The RBI made it clear that banks and NBFCs are not required to raise green money

The RBI made it clear that banks and NBFCs are not required to raise green money

Regardless of how the funds are allocated or used, businesses subject to RBI regulation are required to pay interest on green deposits to their clients in accordance with the terms and conditions specified and mandated guidelines.

The Reserve Bank of India (RBI) said on Friday that although raising green money is not required of banks and non-bank financial companies (NBFCs), they must adhere to the guidelines if they want to do so.

A series of Frequently Asked Questions (FAQs) about the "Framework for Acceptance of Green Deposits" has been released by the central bank.

Comprehensive instructions allowing banks and non-banking financial organizations (NBFCs) to accept "green deposits" were released in April 2023. These deposits may be used to finance green construction, renewable energy, and transportation projects. Was.

On June 1, 2023, this framework went into force.

Regardless of how the earnings are allocated or used, the FAQ states that RBI-regulated enterprises (REs) are required to pay interest on green deposits to their clients in accordance with the terms and circumstances set out in the agreement and any specified instructions.

Additionally, "REs must abide by the existing guidelines mentioned above, but there is no restriction on premature withdrawal of green deposits."

According to the FAQ, early withdrawal will not affect projects or activities that are funded using Green Deposit revenues.

It said that, while waiting to be allocated to green projects or activities, REs might temporarily store the proceeds of green deposits in liquid securities with a maximum maturity of one year.

It said that, with respect to the terms of the framework for green deposits created in India after June 1, 2023, international banks may develop a unified worldwide policy on green deposits.

According to the FAQ, green deposits may only be made in Indian Rupees under the current framework if they are to be made in foreign currency.

When it comes to raising money and distributing it to environmentally friendly initiatives, the financial industry may be quite influential. When the RBI released the guidelines for regulated banks to accept green deposits, it also noted that green finance is becoming more and more popular in India.

In order to fund environmentally friendly initiatives, several REs now provide green deposits.

Enabling RE to "offer green deposits to customers, preserve the interests of depositors, assist customers with accomplishing their sustainability agenda, address greenwashing concerns, and encourage the flow of credit to green activities/projects" is the framework's stated goal and justification. To assist in raising the