Description

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Context:

Considering the threat that climate change poses globally, the Reserve Bank of India (RBI) issued a comprehensive framework for lenders to accept green deposits in April last year.

About Green deposits

Definition	Green deposits are interest-bearing fixed-term deposits with proceeds allocated towards green finance projects. Denominated only in Indian Rupees as per the RBI framework.
Purpose	Funds raised are directed towards sustainable and environmentally friendly projects such as:
	Renewable energy projects (solar, wind, biomass, hydropower)
	Energy efficiency and clean transportation
	Climate change adaptation and sustainable water/waste management
	Development of green buildings and coastal/marine environment projects
	Support for certified organic farming
Key Features	Interest-bearing fixed-term deposit
	Fixed tenure
	Annual third-party audit to ensure compliance with green finance norms
	Deposits insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC) framework
Priority Sector Lending (PSL)	If financed projects align with PSL guidelines, they can be classified under the priority sector.

Role of Deposit Insurance and Credit Guarantee Corporation (DICGC)

The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a special department of the Reserve Bank of India under the Ministry of Finance, Government of India. It was established on 15 July 1978 under the Deposit Insurance and Credit Guarantee Corporation Act, 1961 to insure deposits and guarantee credit facilities.

DIGCC provides insurance for all bank deposits such as term deposits, fixed deposits, demand deposits and non-fixed deposits up to Rs 500,000 per depositor in the bank. On 4 February 2020, the limit was raised from Rs 1 lakh to Rs 5 lakh.

Source:

The Hindu

PRACTICE QUESTION

Q.Discuss the significance of the Reserve Bank of India's Green Deposit Framework in promoting sustainable finance in India. Analyze the challenges and opportunities it presents for financial institutions and the broader economy. (250 words)