SBI Urges RBI for Lower CRR on Green Deposits to Foster Sustainable Financing

SBI Urges RBI for Lower CRR on Green Deposits to Foster Sustainable Financing

Country’s largest lender, State Bank of India (SBI), has approached the Reserve Bank of India (RBI) to request a lower cash reserve ratio (CRR) specifically for green deposits raised from customers. This initiative aims to promote environmentally friendly financing within the banking sector.

SBI’s Proposal to RBI

  • Reduction in CRR specifically for green deposits.
  • Inclusion of this reduction as a part of the overall banking policy applicable to all banks.

Implementation of Environmental, Social, and Governance (ESG) Parameters

SBI has started evaluating borrowers based on Environmental, Social, and Governance (ESG) criteria. This information is shared with borrowers to raise awareness. However, loan pricing is not currently influenced by ESG standings.

Differential Pricing for Green Deposits

SBI has requested regulatory approval for implementing differential pricing for green deposits. This move is aligned with their strategy to promote environmentally conscious financing.

Green Financing Initiatives

SBI introduced a green rupee term-deposit scheme in January to fund eco-friendly projects. The bank targets retail customers and high net worth individuals through family offices. These deposits offer slightly reduced interest rates compared to regular retail deposits.

Market-based Green Funding

In addition to deposits, SBI has accessed markets for green funding. This includes issuing senior unsecured green floating rate notes in December 2023, amounting to $250 million.

Future Impact on Loan Pricing

Khara anticipates that ESG parameters will begin to influence loan pricing within the next two to three years. The growing awareness in the ecosystem regarding environmental factors will eventually impact loan pricing strategies.

Need for Accounting Standards

To effectively track green assets and liabilities, Khara emphasizes the necessity of accounting standards. Bodies like the Institute of Chartered Accountants of India could provide these standards to ensure credibility in green financing.

Multiple Choice Questions (MCQs) with Answers:

  1. What has SBI requested from the RBI regarding green deposits?
    • a) Increase in CRR
    • b) Reduction in CRR
    • c) No change in CRR
    • d) Elimination of CRR
    Answer: b) Reduction in CRR
  2. What is SBI’s approach towards evaluating borrowers?
    • a) Based solely on credit history
    • b) Using Environmental, Social, and Governance (ESG) parameters
    • c) Without considering ESG factors
    • d) Random selection process
    Answer: b) Using Environmental, Social, and Governance (ESG) parameters
  3. What is the main purpose of SBI’s green rupee term-deposit scheme?
    • a) To fund non-environmental projects
    • b) To attract retail customers with high interest rates
    • c) To finance environmentally friendly projects
    • d) To provide long-term deposits with no specific purpose
    Answer: c) To finance environmentally friendly projects