Relaxation In CRR Norms For Green Deposits Will Encourage Lending: SBI Chairman
The Chairman of State Bank of India (SBI), Dinesh Khara, on Friday, requested the Reserve Bank of India (RBI) to consider reducing the cash reserve ratio (CRR) on green deposits.
This move is aimed at encouraging banks to raise funds for environmentally friendly projects. Currently, banks are required to keep aside 4.5 per cent of their deposits without earning any interest with the RBI.
"However, a CRR exemption on these deposits will allow banks to free up more funds to lend to sustainable projects," Khara said.
Khara stated that SBI has asked the regulator to reduce CRR for green deposits and incorporate this policy. He made this statement during a conference organised by IIM Kozhikode and NSE.
"We have asked (the regulator), for a reduction in CRR for green deposits and secondly, if at all as a policy it can be incorporated," said Khara.
Banks have to keep aside 4.5 per cent of their deposits without earning any interest with the RBI. A CRR exemption on these deposits will free up more funds for banks to lend to environmentally friendly projects.
In January, State Bank of India (SBI) introduced green deposits in three different tenures: 1111 days (6.65 per cent), 1777 days (6.65 per cent), and 2222 days (6.40 per cent). Depositors can invest in these deposits through the bank's branch network. The deposit rates are about 10 basis points lower than the rates offered on regular deposits by SBI. One basis point is 0.01 percentage point.
SBI launched green deposits after a RBI notification in April last year, allowing banks to offer these special deposits, the proceeds of which are earmarked for being allocated towards green finance.
According to SBI Chairman Dinesh Khara, it will take some time before the impact of green deposits is felt on the pricing of loans and deposits. "An 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," he said.
Khara also mentioned that SBI has started evaluating borrowers based on their environmental, social and corporate governance (ESG) ratings. It is also engaging with rating entities to see if an accounting standard can be set for green financing.
