MUMBAI: With climate change emerging as an overarching risk to the global economy as well as financial systems, the Reserve Bank of India is exploring adequate insurance coverage for green deposits, deputy governor Michael Patra said.
“We are exploring appropriate coverage for green deposits, climate-risk based differential premiums and ex-ante funding needs for climate sustainability,” Patra told the 79th executive committee meeting of the International Association of Deposit Insurers in Rome over the weekend. While Patra did not elaborate on RBI’s plans, the move is expected to bring more funds to environment-friendly projects.
Patra urged deposit insurers to brace for more complex challenges amidst the heightened uncertainty especially from the impact of climate change, which threatens to disrupt the global economy.
“New challenges arising from climate changes will inevitably require effective coordination and information sharing between domestic insurers and other national safety net participants as well as with those in other jurisdictions,” Patra said in his speech.
RBI had issued the framework for green deposits in April 2023, with the broad objective of developing a green finance ecosystem. Under the framework, regulated entities can offer green deposits to customers and boost the sustainability agenda, address ‘green-washing’ (false claims on sustainability), and help increase the flow of funds to green projects.
Deposit insurance is mandatory for all the banks in India, including foreign banks operating in the country. However, insurance coverage is a sticky issue. The Deposit Insurance and Credit Guarantee Corporation of India, a subsidiary of the RBI, covers deposits only up to `5 lakh. It steps in, in the event of a bank collapse.