Daily Current Affairs : 23-December-2024
In India, the adoption of green deposits has been slow, despite the growing global focus on sustainability. Green deposits are a type of interest-bearing account where the funds raised are used to finance environmentally friendly projects. These projects may include renewable energy, sustainable water management, and clean transportation. While the Reserve Bank of India (RBI) introduced a framework for green deposits in June 2023, there are several challenges that have hindered their widespread adoption in the country.
What Are Green Deposits?
Green deposits are designed to support environmentally sustainable initiatives. The funds from these deposits are specifically directed towards projects that help reduce carbon footprints and promote sustainability. Examples of such projects include:
- Solar energy development
- Electric transportation
- Efficient water management systems
The Challenges Facing Green Deposits
- Unattractive Interest Rates: One of the primary reasons green deposits have seen limited adoption is the low interest rates they offer compared to regular fixed deposits. Customers are often more inclined to invest in standard deposits, which provide higher returns.
- Lack of Clear Guidelines: Banks are facing difficulty in defining which activities truly qualify as “green.” Without clear, standardized criteria, there is uncertainty about how the funds are being utilized, which makes potential investors hesitant.
- Higher Cash Reserve Ratio (CRR): Green deposits are subject to a higher CRR requirement than regular deposits. This means that banks must set aside a larger portion of the funds, which could discourage them from promoting these products more aggressively.
- Low Public Engagement: There is also limited awareness among the public about the importance of green deposits and their role in achieving environmental goals. This lack of engagement further limits their uptake.
India’s Commitment to Green Finance
Despite these challenges, India remains committed to achieving carbon neutrality by 2070. Green finance, including green deposits, is seen as a crucial component in this transition. The government and the RBI are working to create more favorable conditions for green investments, but the journey to widespread adoption will require overcoming the existing barriers.
Important Points
- What Are Green Deposits?
- Green deposits are interest-bearing accounts that fund environmentally sustainable projects (e.g., solar energy, clean transportation, water management).
- Challenges Hindering Adoption of Green Deposits:
- Low Interest Rates: Green deposits offer lower returns compared to regular deposits, discouraging customers.
- Lack of Clear Guidelines: Banks face difficulties in defining which projects qualify as “green,” creating uncertainty for investors.
- Higher Cash Reserve Ratio (CRR): Green deposits have a higher CRR requirement, making them less attractive for banks to promote.
- Limited Public Awareness: There is insufficient engagement and understanding among the public about the importance of green deposits.
- RBI’s Role: In June 2023, the Reserve Bank of India introduced a framework to promote green deposits and sustainable investments.
- India’s Green Finance Goal: India aims for carbon neutrality by 2070, with green finance playing a key role in achieving this goal.
- Future Prospects: Overcoming barriers like low interest rates and unclear definitions of green projects is crucial to driving the growth of green deposits in India.
Why In News
Green deposits in India face sluggish adoption due to pricing issues, low public engagement, limited interest from private banks, and a lack of clear regulatory guidelines, which together hinder their growth and broader acceptance.
MCQs about Green Deposits in India
-
What are green deposits primarily used for in India?
A. Funding social welfare projects
B. Financing environmental and sustainable initiatives
C. Supporting traditional banking operations
D. Offering higher returns for customers
-
Which of the following is a major challenge in the adoption of green deposits in India?
A. Higher interest rates compared to regular deposits
B. Lack of clear guidelines on what qualifies as a “green” project
C. Too much public engagement and awareness
D. Low Cash Reserve Ratio (CRR) requirements
-
Why do green deposits offer lower interest rates than regular deposits?
A. To ensure higher returns for customers
B. To encourage customers to choose regular deposits
C. To make more funds available for green projects
D. Due to higher operational costs in green investments
-
What is India’s long-term goal regarding sustainability?
A. Achieve carbon neutrality by 2050
B. Promote traditional banking practices
C. Achieve carbon neutrality by 2070
D. Eliminate interest rates on green deposits
Boost up your confidence by appearing our Weekly Current Affairs Multiple Choice Questions
