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RBI releases FAQs on green deposits: Premature withdrawal, overdraft facility and more
Is it mandatory for the regulated entities (REs) to raise green deposits?
It is not mandatory but in case REs intend to raise green deposits from their customers they should follow the framework prescribed therein.
Is it permissible for REs to offer differential interest rates on green deposits? Whether there is any bearing on the interest rate payable by REs to depositors if the funds raised under the framework remain unallocated/ unutilised towards the green activities or projects? Is there any restriction on premature withdrawal of green deposits?
The extant guidelines do not permit REs to offer differential rate of interest on green deposits.
The REs shall pay interest on green deposits to their customers as per agreed terms and conditions and aforesaid directions irrespective of allocation/utilisation of proceeds.
There is no restriction on premature withdrawal of green deposits.
However, the REs, shall adhere to the extant guidelines.
As per the framework, unallocated proceeds of green deposits can be invested in liquid instruments with maturity up to one year only. What are these 'liquid instruments'? Is there a requirement that temporary allocation of proceeds is only for a period of one year? Will there be any penalty if the REs are not able to allocate the proceeds of green deposits?
The liquid instruments are level 1 high quality liquid assets, as per the extant guidelines.
The REs can temporarily park proceeds of green deposits, pending allocation towards green activities/ projects, in liquid instruments with maximum maturity up to one year (This will have to be specified under the financing framework).
The framework does not envisage any penalty for non-allocation of proceeds towards green activities/ projects; however, it shall be subject to supervisory review.
Are the green deposits raised prior to release of framework covered under it? Whether the REs can finance green activities/projects first and then later raise green deposits?
The framework is applicable for green deposits raised by REs on or after June 1, 2023.
REs cannot finance green activities/projects first and raise green deposits thereafter.
Can banks allow overdraft facility to customers against green deposits?
Banks are allowed to offer overdraft facility to customers against green deposits subject to the instructions contained in the consolidated circular on opening of current accounts and CC/OD accounts by banks dated April 19, 2022, as amended from time to time.
Are the deposits raised under the above framework covered by Deposit Insurance and Credit Guarantee Corporation (DICGC)?
The deposits raised under the framework are covered by DICGC in accordance with the Deposit Insurance and Credit Guarantee Corporation Act, 1961 and the regulations framed thereunder, as amended from time to time.
Whether foreign banks can have a single global policy on green deposits?
Foreign banks can have a common global policy on green deposits, without prejudice to the provisions of the framework for green deposits raised in India after June 1, 2023.
Can the green deposits be denominated in foreign currency?
No.
The current framework permits green deposits to be denominated in Indian rupees only.
