Green Deposit Framework
The RBI Green Deposit Framework, introduced in April 2023, requires regulated entities offering green deposits to earmark the proceeds for environmentally sustainable activities as defined by an eligible list, with mandatory third-party verification, ring-fenced accounting, and impact disclosures.
As sustainable finance gained global momentum, Indian banks began offering products labelled as 'green fixed deposits' without a standardised definition of what constituted eligible green end-use. To bring order and credibility to this nascent market, RBI issued the Framework for Acceptance of Green Deposits on 11 April 2023, effective 1 June 2023. The framework applies to all Scheduled Commercial Banks (excluding RRBs and LABs) and deposit-taking NBFCs.
Under the framework, green deposits must be applied only to a defined list of eligible green activities, which includes renewable energy (solar, wind, biomass, hydro), energy efficiency, clean transportation, climate change adaptation, sustainable water and waste management, green buildings, biodiversity conservation, and sustainable agriculture. Activities related to fossil fuel production, gambling, tobacco, alcohol, weapons, and nuclear power are explicitly excluded.
Banks must maintain a separate register or ledger to track green deposit proceeds and their deployment — this ring-fencing ensures that proceeds are not commingled with general funds. A board-approved green deposit policy must be made publicly available. The proceeds from green deposits must be allocated within a specified period, with any undeployed funds to be invested in liquid, low-risk instruments.
Third-party verification is a key accountability mechanism. Banks are required to appoint an independent third-party verifier to assess the allocation and impact of green deposit proceeds on an annual basis. The verification report, along with an impact report disclosing the environmental outcomes achieved, must be disclosed on the bank's website within a defined timeline.
The framework explicitly states that green deposits do not carry any additional guarantee from the government or the Deposit Insurance and Credit Guarantee Corporation (DICGC) — the guarantee remains the standard Rs 5 lakh per depositor. This distinction is important for retail depositors who might otherwise assume implicit government backing. The framework is seen as a stepping stone toward a broader green finance taxonomy for India, aligned with the country's COP26 commitments and its net-zero-by-2070 target.