Green Deposits - A New Instrument In India’s Net- Zero Journey; Solar & EV Are Gaining Momentum

India is making significant strides in developing climate financing avenues. While the country has committed to achieving net zero emissions by 2070, reaching this goal will require robust and sustained financial support.

It is estimated that India requires around USD 2.5 trillion to meet its Nationally Determined Contribution (NDC) targets till 2030. Requirements on energy transition are further amplified with India’s vision of Viksit Bharat by 2047. It is estimated that for energy transition total investment required around USD 250 billion per year till 2047. These numbers clearly highlight importance of climate fundings. Given the current geopolitical scenario, internal mobilization of funds and investments are more critical for India to achieve its climate related ambitions.

In June 2023, the Reserve Bank of India (RBI) launched the Green Deposit product to channelise fixed tenure deposits toward environmentally sustainable projects, such as renewable energy, energy efficiency and clean transportation. This initiative has provided a timely boost to industries seeking funds to green projects. To strengthen the governance and transparency, RBI mandated key safeguards such as third-party review of green deposit framework and impact assessments —crucial steps to mitigate greenwashing risks from the outset. CareEdge Advisory analysed green deposits adoption and impact in the banking sector during FY 2024-25.

Green Deposits in FY 2024–25: Key Trends and Insights

CareEdge Advisory has analysed the adoption and impact of green deposits in the banking sector for FY 2024–25, based on data published by banks up to July 2025. The following key insights were noted:

- A total of Rs 2,678.85 crore in green deposits has been mobilized by 15 banks so far this fiscal year.

- The public sector banks are leading the space accounting for nearly 75 percent of the total green deposits raised.

- Deployment of funds is largely concentrated in the solar and electric vehicle (EV) sectors.

- Solar sector commands a dominant 74 percent share in deployment, and the remaining has been with the EV sector.

Graph 1 clearly indicates public sector banks are playing proactive role in advocating this product to channelise the funding towards green activities. Renewable energy sector has certainly emerged as primary beneficiary in attracting these funds (as shown in graph 2) which is also well supported by central government policies in pursuit of India’s goal to achieve 50 percent of electricity generation capacity from non-fossil fuel sources by 2030 as outlined in its Nationally Determined Contributions (NDCs). Moreover, graph 3 highlights that over 97 percent of green deposits raised in FY25 have been deployed by the banks, indicating strong demand of such projects and banks are actively targeting these emerging areas.

Challenges Hindering Wider Adoption

Despite the positive intent and early momentum, green deposits have yet to gain significant traction. As of FY 2024–25, the total green deposits raised still account for less than 1 percent of the overall deposits mobilised by these banks. Several challenges continue to hinder broader adoption:

Inadequate Awareness Among Depositors- Most investors remain unaware of the differences between conventional fixed deposits and green deposits, limiting uptake.

Lack of Incentives- Currently Green deposits do not offer incentives to either depositor or to financial institutions such as higher interest rates for deposits or reduction in CRR requirements for banks which makes the product less attractive.

High compliance – The absence of incentives also limits banks from offering this product that involve stringent compliance requirements, such as third-party review of framework before issuance and impact assessment after deployment of proceeds. While these measures are necessary to address any green washing concerns, without proper incentives, financial institutions especially private institutions are adopting a very cautious approach towards this instrument.

Uncertainty Around Eligible Categories – While most of the current deployment of green deposits are channelised towards easily identified green activities like renewable and clean transportation. There are many other categories which are also classified as “Green” under RBI’s framework such as Climate Change Adaptation and Biodiversity conservation, but industry participants remain cautious in undertaking such investments given lack of clarities on activities that will qualify as green as well as KPIs to measure impact of these categories. The forthcoming Climate Taxonomy is expected to provide answers to these categories and activities aligning with it.

Limited Availability of Bankable projects – For sustained growth, financial institutions need access to viable, bankable projects that offer adequate returns. Government support through policies, subsidies, and financial assistance will be crucial in making these projects attractive to investors and lenders alike.

Going Ahead Among the broader category of GSS (Green, Social, and Sustainability) spectrum, green deposits hold significant potential to drive investments towards greening the economy. In India, continuous policy support for green initiatives is expected to continue.

With appropriate incentives, broader adoption, and robust regulatory frameworks, green deposits can evolve into a mainstream financial instrument for financial institutions, contributing meaningfully to India’s net-zero targets.

(Author brings over 20+ years of experience in financial services industry primarily in ESG/Sustainability areas. Areas of specialization include consulting on ESG strategies, roadmap, compliance & reporting and ESG frameworks. Worked extensively with across industries helping corporates and institutions build strong governance around ESG and sustainability journey.)

Published on: Friday, August 22, 2025, 02:19 PM IST