Green deposits and green lending (RBI rules)

A green deposit is a fixed deposit at a bank whose money is earmarked for green lending or green investment. For the depositor, it works like any other fixed deposit: same interest terms, same deposit insurance, same right to withdraw early. The difference is on the bank's side. The bank promises to use an equal amount of money for eligible green activities and to report on it.

RBI first set rules for green deposits in April 2023. On 28 November 2025, as part of a wider clean-up of its rules, RBI replaced them with Directions on Climate Finance and Management of Climate Change Risks. Separate versions apply to commercial banks, to small finance banks, and to deposit-taking NBFCs and housing finance companies.

For analysts, green deposits are a window into a bank's green loan book. They show how much green lending the bank is willing to commit to and verify in public.

The deposit itself (commercial bank rules)

• Raising green deposits is optional.
• They can be cumulative or non-cumulative, and must be in Indian rupees.
• Tenor, size and interest follow RBI's normal rules for deposits. The rules do not allow a bank to offer a different interest rate on green deposits.
• Interest is paid as agreed, whatever happens to the use of the money.
• Early withdrawal is allowed, and deposits are covered by DICGC deposit insurance.
• Overdrafts against green deposits are allowed under the usual credit rules.

Board policies and the financing framework

• The bank needs a board-approved green deposit policy, published on its website.
• It also needs a board-approved financing framework covering eligible activities, how projects are selected and monitored, how money is allocated, reporting, third-party verification and impact assessment.
• The financing framework needs an external review. The framework and the reviewer's opinion must be published on the bank's website before it is used.
• Money not yet allocated may be parked only in Level 1 high-quality liquid assets with an original maturity of up to one year.
• A bank may fund green projects without raising green deposits. But it cannot fund projects first and then raise green deposits for those same projects later.

Eligible activities

Allocation should follow India's official green taxonomy once it is final. Until then, the interim list is:

1. Renewable energy
2. Energy efficiency
3. Clean transportation
4. Climate change adaptation
5. Sustainable water and waste management
6. Pollution prevention and control
7. Green buildings
8. Sustainable management of living natural resources and land use
9. Terrestrial and aquatic biodiversity conservation

Investment in sovereign green bonds also counts. Eligible green loans may also qualify as priority sector lending.

Excluded activities

• Fossil fuel extraction, production or distribution, and projects whose main energy source is fossil fuel
• Nuclear power generation
• Direct waste incineration
• Alcohol, weapons, tobacco, gaming and palm oil industries
• Biomass energy using feedstock from protected areas
• Landfill projects
• Hydropower plants larger than 25 MW

Verification, impact and reporting

• Third-party verification: every year, for the money raised that year. At a minimum, it covers use of proceeds against eligible projects and the adequacy of the bank's policies and controls. It does not remove the bank's own responsibility for checking end use.
• Impact assessment: every year, done with external firms, covering the impact of the bank's green lending and investment. Example indicators include MWh of renewable energy generated, tCO2e avoided, tonnes of waste kept out of landfill and kilometres of clean transport built. If impact cannot be measured, the bank must explain why and give a time-bound plan.
• Publication: the verification report and the impact assessment report go on the bank's website.
• Board review: within three months of the end of each financial year, a review report covering deposits raised, projects funded, amounts allocated and the two reports goes to the board or a board committee.
• There is no penalty for money that stays unallocated, but it is subject to RBI's supervisory review.

An example product

SBI launched its Green Rupee Term Deposit on 12 January 2024, with tenors of 1,111, 1,777 and 2,222 days. It was open to individuals, including NRIs, and was first sold through branches, with digital channels to follow.

Reading a bank's green deposit disclosures

1. Green deposits raised in the year, and as a share of total deposits.
2. Amount allocated, by category, and how much is still parked in liquid assets.
3. The verifier's scope and findings.
4. Impact figures, and whether they are measured or estimated.
5. The bank's wider exposure to excluded sectors, such as coal and oil and gas, from the rest of its loan book.