Lenders including the State Bank of India (SBI) are grappling with challenges in mobilising green deposits, despite efforts to promote environmentally friendly financing options. More than a year after the Reserve Bank of India (RBI) introduced guidelines for banks to encourage green deposits, the uptake has been limited due to a lack of incentives for both banks and customers.
The SBI had earlier this year introduced SBI Green Rupee Term Deposit, a special fixed deposit scheme. that goes beyond traditional investments, aiming to channel funds into environmentally-friendly projects. As part of a broader commitment to India’s net carbon neutrality goal by 2070, the SBI scheme offers investors a unique opportunity to contribute to eco-positive initiatives. However, the scheme has received poor response, according to reports.
Investing in green deposits symbolises a collective step forward towards sustainability. It allows investors to contribute to a greener future while ensuring their financial legacy is aligned with environmental responsibility.
Green deposits are specialised financial instruments intended to fund projects that promote sustainability, such as renewable energy and clean transportation.
Steps required
Despite these efforts, industry experts highlight that the current regulatory framework lacks sufficient incentives to encourage widespread adoption of green deposits. Banks argue that incentives such as reductions in the Cash Reserve Ratio (CRR) or Statutory Liquidity Ratio (SLR) on green deposits could incentivize them to allocate more funds to green sectors. Currently, banks do not receive such concessions, unlike when they raise funds from multilateral institutions, where favorable terms are often tied to specific use in green initiatives.
Looking ahead, experts propose exploring additional incentives, such as interest subvention for loans towards green projects and expanding the scope of Priority Sector Lending (PSL) to include more green categories. Currently, only loans up to Rs 30 crore for renewable energy projects qualify under PSL, indicating room for expansion to support broader sustainability goals.
Furthermore, to ensure transparency and credibility in green financing, experts recommend establishing a robust ecosystem of third-party verifiers and assessors specialized in sustainable finance. This measure aims to prevent ‘greenwashing’—where investments are inaccurately presented as environmentally beneficial—and to accurately measure the impact of green deposits.
As India continues to pursue its goal of achieving net-zero emissions and promotes sustainable development, the effectiveness of green deposits in mobilizing capital for green initiatives remains a critical area of focus for policymakers and financial institutions alike.
