Green Deposits in India face sluggish adoption due to pricing issues, low public engagement, and limited interest from private banks. 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 (RBI) introduced a framework for Eco-friendly deposit 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 Eco-friendly deposit 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 Eco-friendly deposit is higher, which could be a barrier to attracting more customers.
India aims for carbon neutrality by 2070, with green finance pivotal in this transition.
MCQs
What is the purpose of green deposits?
(a) Funding traditional infrastructure projects
(b) Earmarked for funding green projects like solar energy
(c) A tax-free financial instrument for personal savings
(d) Financing large-scale industrial developments
Which of the following is a challenge for green deposits in India?
(a) High interest rates compared to regular deposits
(b) Lack of CRR requirements
(c) Difficulty in defining qualifying “green” activities
(d) Absence of international frameworks
Read more: India State Of Forest Report (ISFR)
