Banks are stepping up their focus on green deposits, with public sector lenders accounting for the bulk of collections so far. However, growth remains at a nascent stage, and total amounts mobilised are still small compared to the overall deposit base of the banking system.
Green deposits are a type of fixed deposit that allows investors to invest money in sustainable and eco-friendly initiatives.
Regulatory Levers
According to Sachin Sachdeva, vice president – financial sector ratings at ICRA, “Any regulatory dispensation such as relaxation in cash reserve ratio (CRR) requirements for green deposits, if granted, may improve the unit economics of such deposits.”
Banks could pass on some of the benefits by offering rates closer to conventional term deposits, said Sachdeva. However, he cautioned that “CRR relief would only act as a marginal cost lever,” and its broader impact on scaling up green deposits may remain limited.
He also emphasised the need for standardisation. “A clearly defined climate finance terminology would help the sector reduce friction among stakeholders, bring uniformity in product structuring and provide clarity on eligibility across the value chain.”
From a lender’s standpoint, he pointed out that while CRR relief and clearer definitions would be supportive, they would not be the primary growth drivers. Instead, tools such as guarantees, blended finance structures and targeted fiscal incentives would be more effective in lowering risk premiums and capital requirements, enabling banks to lend at more competitive rates while maintaining returns.
Momentum in the Vaults
“There is a lot of public awareness and we find especially the youth more conscious about social causes and green deposits… We went to our app and website and just promoted this concept of green deposits… Customers are choosing green deposits. So, we are actually quite happy to note that there is a movement for green deposits,” V. Vaidyanathan, managing director and CEO at IDFC First Bank, said last week. Between July 2024 and December 2025, the bank raised green deposits worth more than Rs 970 crore.
State Bank of India reported collections of Rs 172.26 crore, up from Rs 75.44 crore a year ago, marking a year-on-year growth of 128.3%. Bank of Baroda saw its green deposits rise to Rs 1,707 crore from Rs 1,038.51 crore in December 2024, a 64.4% increase.
Among smaller lenders, Bank of Maharashtra recorded a quarter-on-quarter rise of 16.8%, reaching Rs 63 crore, while UCO Bank nearly doubled its green deposits Q-o-Q to Rs 190 crore. Central Bank of India reported green deposits of Rs 406.23 crore as of December 31, up sharply from Rs 70 crore a year ago.
Banks have also stepped up financing to green projects – increasing credit exposure to renewable energy, electric mobility, sustainable infrastructure and other climate-focused sectors, aligning their portfolios with environmental goals. SBI in its December investor presentation said it aims to have at least 7.5% of domestic gross advances to be green by 2030.