RBI allows lenders to take deposits for funding green projects

The Reserve Bank of India will allow banks to raise ‘green deposits’ from June as it seeks to boost allocation of funds towards renewable energy and clean transportation projects.

The decision is part of the central bank’s push to put in place regulations that encourage the nation’s banks to lend more to environment-friendly projects and mitigate risks emerging from climate change.

“The allocation of proceeds raised from green deposits shall be based on the official Indian green taxonomy,” the RBI said in a statement Tuesday.

In the absence of such a taxonomy, the central bank listed out a number of areas, such as renewable energy, waste management, organic farming, where the deposits can be deployed for now.

The green deposits will be denominated in Indian rupees, and funding will be subject to annual third-party scrutiny, the central bank said. The lenders will also need to monitor the end use of the deposits on an annual basis.

India has pledged to become a net zero greenhouse gas economy by 2070. It is ranked 104th out of 192 countries in an index of climate readiness compiled by the Notre Dame Global Adaptation Initiative that measures a country’s ability to leverage investments toward adapting to higher temperatures and extreme weather.