RBI guidelines to help mobilise domestic capital towards green activities
- May 1, 2023
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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RBI guidelines to help mobilise domestic capital towards green activities
Subject :Economy
Section Monetary policy
Context: Reserve Bank of India (RBI) has issued a framework for green deposits, which are investments meant to be used towards environmentally sustainable projects.
More on the News:
- The purpose and rationale for the framework, RBI said is 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”.
Key Features of the Framework for acceptance of green deposits
- Applicability: The framework is applicable to Scheduled Commercial Banks, including Small Finance Banks, excluding Regional Rural Banks, Local Area Banks and Payments Banks and all deposit-taking Non-Banking Financial Companies (NBFCs), including Housing Finance Companies.
- Allocation: REs will be required to allocate the proceeds raised through green deposits towards a list of green activities and projects that encourage energy efficiency in resource utilization, reduce carbon emissions and greenhouse gases, promote climate resilience and/or adaptation, and improve natural ecosystems and biodiversity.
- Exclusion: Projects involving new or existing extraction, production and distribution of fossil fuels, including improvements and upgrades, nuclear power, direct waste incineration, alcohol, weapons, tobacco, gaming, or palm oil industries, renewable energy projects generating energy from biomass using feedstock originating from protected areas, landfill projects and hydropower plants larger than 25 MW have been excluded from green financing.
- Financing Framework:
- To ensure effective allocation of green deposits, REs must put in place a Board-approved Financing Framework (FF). The green deposits shall be denominated in Indian Rupees only.
- The allocation of funds raised through green deposits by REs during a financial year shall be subject to independent third-party verification/assurance, which shall be done on an annual basis.
Green Bonds: https://optimizeias.com/rbi-unveils-plans-to-raise-%E2%82%B916000-crore-via-sovereign-green-bonds/