State Bank of India (SBI) chairman Dinesh Khara mentioned on Friday that the financial institution is presently in discussions with the Reserve Bank of India (RBI) relating to a possible discount within the cash reserve ratio (CRR) requirement for green deposits.
SBI had launched a green deposit scheme final month, marking a big initiative within the home banking sector. The scheme goals to draw long-term retail deposits particularly designated to fund green transition initiatives or climate-friendly initiatives.
Under the green deposit scheme, SBI presents rates of interest which can be 10 foundation factors lower than common deposit charges. Currently, the CRR stands at 4.5 per cent, requiring banks to take care of a sure portion of their deposits with the RBI as a solvency measure, with out incomes any curiosity on these reserves.
“We are engaging with the regulator for a reduction in the CRR for green deposits, and secondly, if at all as a policy, it can be incorporated into the regulator policy mechanism. Early beginning has happened from the regulator’s side also, but maybe it will take two to three years to start having an impact on the pricing too,” Khara mentioned at an occasion organised by the Indian Institute of Management Kozhikode.
Khara emphasised the significance of sensible and dependable scores for green financing, expressing considerations about potential greenwashing. He talked about that SBI is partaking with score companies to discover the potential for establishing an accounting normal for green financing. Additionally, SBI has begun evaluating debtors primarily based on environmental, social, and governance (ESG) scores.
Regarding the historical past of negotiations between SBI and the RBI, Khara famous that his predecessor, Pradip Chaudhary, had beforehand sought curiosity funds from the RBI on deposits held below the CRR.
SBI’s green rupee mounted deposit scheme, launched final month, presents varied tenors with rates of interest roughly 10 foundation factors lower than the prevailing charges on common mounted deposits of comparable tenors. The RBI has applied a framework for accepting mounted deposits since June 2023, requiring monetary establishments to prioritise elevating green deposits earlier than financing green initiatives. The proceeds from green deposits will be invested in liquid devices with a maturity of as much as one yr.
