RBI green deposit insurance plan an attractive proposition for banks

In 2023, the RBI floated the green deposit framework for banks. The proceeds under this scheme were linked to dedicated low-carbon sectors and depositor risk perceptions were elevated as compared to conventional deposits. In this context, the RBI is now working on revamping the scheme by insuring green deposits as well. Given the scale of financing required for low-carbon technologies, this may be crucial in unlocking banking capital.

What will be the extent of the insurance coverage under the scheme?

Moreover, how effective will this scheme be in boosting green deposits? What other measures may emerge to further catalyse green deposits?