I. Introduction to Green Deposits

- Green deposit is an interest-providing financial instrument held by regulated entities (RE) for a pre-decided duration.

- The primary function of such a deposit is to allocate funds towards green finance which includes investments into projects that are environmentally friendly and sustainable.

II. Why in the News: RBI's Notification

- Recently, this subject was brought into the limelight after The Reserve Bank of India's (RBI) issued a notification on April 11, 2023.

- According to the notification, green deposits fell under the umbrella of the Deposit Insurance and Credit Guarantee Corporation (DICGC).

III. Understanding Deposit Insurance and Credit Guarantee Corporation (DICGC)

- The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a subsidiary of the Reserve Bank of India.

- Its primary role is to provide insurance coverage for bank deposits and guarantee credit facilities offered by registered banks.

- By ensuring green deposits under the ambit of DICGC, RBI is often viewed as strengthening the assurance mechanism for such instruments.

IV. Significance of RBI's Clarification

- This development signifies that the green deposits are now insured, making them a safer option for investors.

- This may drive greater investments into green deposits, thereby aiding the growth of green finance.

- It is also seen as a stride towards achieving the UN Sustainable Development Goals, supporting India's commitment to transitioning to a cleaner and more sustainable economy.

V. GK Portion- Geography and Environment

- Green finance and consequently green deposits are a part of the global strategy to combat climate change issues.

- Such financial mechanisms largely support the climate resilience plans of not just India but other nations actively participating to reduce the global carbon footprint.

VI. Looking Ahead: The Potential Impact

- With this insured status, green deposits are expected to witness a surge in popularity among investors.

- As more and more people put their money into green deposits, more funds can be allocated towards sustainable projects, pioneering a positive impact for the environment.

- Overall, this development from RBI signifies a promising future for green finance in India.