What Are Green Deposit Schemes? Check Their Benefits And The Risks

In recent times, banks such as the Bank of Baroda, and the State Bank of India, have announced the launch of their green fixed deposit, Bob Earth Green Term Deposit schemes. This launch comes on the back of raising deposits to fund qualifying environmental initiatives and sectors. “The BoB Earth Green Term Deposits offer depositors the opportunity to earn attractive interest rates on a range of tenors and participate in India’s transition to a green and sustainable economy. The Bank is offering interest rates of up to 7.15 per cent per annum. The General Public/Resident Indians, NRIs, and High Net Worth Individuals (HNI) investors are all eligible to invest in the BoB Earth Green Term Deposit scheme,” according to a Bank of Baroda press release issued recently. Bank of Baroda offers special durations within the Bob Earth Green Term Deposit, with options for terms of 1.5 years and 1717 days.

The money collected from BoB Earth Green Term Deposits will be used for eco-friendly projects like renewable energy, clean transportation, sustainable water and waste management, energy efficiency, climate change adaptation, pollution prevention and control, green buildings, and biodiversity conservation.

What Are Green Deposits:

In today's world of finance, traditional Fixed Deposits (FDs) have long been favoured by investors seeking a secure place for their money. But now, there's a shift towards a greener future with Green Deposits. These aren't your ordinary investments; they represent a pledge to protect the environment while providing investors with a mix of financial security and ethical investment opportunities.

For those seeking to invest additional funds in environmentally friendly projects, green deposits are fixed-term deposits. By financing projects that benefit the environment, investors are given a way to support sustainability goals. In turn, these projects would support businesses and industries to fulfil their goals of a climate-resilient, low-carbon, sustainable economy. By welcoming a wide range of stakeholders, green deposits are inclusive. You can go for the cause of the green movement, irrespective of whether you are an individual, a sole proprietorship, part of a Hindu Undivided Family (HUF), or representing association groups, or non-profit organizations. 

“The RBI aims to establish a green financial system (GFS) in India and has provided a framework to collect 'green deposits' from regulated entities (REs), such as banks and non-banking financial companies ( NBFC) there. This will help encourage investment in green/sustainable infrastructure in India and consumer development policy. Lean investment projects include energy efficiency in infrastructure, reducing carbon emissions and greenhouse gases, building climate resilience growth, and improving biodiversity in natural ecosystems,” according to a recent Deloitte research report. 

Here are the main benefits of green deposits: 

Good Environment Impact: By supporting projects that deliver substantial environmental benefits, investors directly support global sustainability efforts. 

Offer A Wide Range Of Objectives: For matured investors, green deposits fulfil a wide range of objectives such as environmental, social, and corporate governance (ESG). 

Moral Satisfaction: Investors get satisfaction from the fact that their investments are aligned with higher values of environmental protection and moral responsibility. 

Competitive Interest Rates: Green savings accounts come with competitive interest rates. Hence it’s a myth that they have low returns. Moreover, it promotes corporate responsibility. Green storage leads to sustainable practices. 

Having said that, green fixed deposits are associated with some risks related to financing projects, such as technical issues or regulatory changes. Moreover, the availability of such FDs may differ from bank to bank. And this limits options to the investors. Hence, it’s advised to read through the terms and conditions of the research and interest rates, before investing.