Earning a handsome interest on your investment is alluring. At the same time, to be able to invest in a project that is environment friendly with that money is a frosting on the cake. Something similar happens in the case of green deposits.
These deposits, as a matter of fact, are quite similar to ESG funds. Just as mutual funds — through ESG funds — want to invest in companies which are high on environmental, social and governance parameters; the same way — those lenders want to invest in projects which are environment-friendly including a hydro or solar power project.
Likewise, a housing finance can finance a residential project which has green buildings. To finance these and similar projects, lenders raise funds through green fixed deposits (FDs).
Green deposits are not too dissimilar from a regular fixed deposits. The only difference lies in the eventual use of the money raised through fixed deposits. Also, the difference in interest rate is not significant to impact investors’ decision.
It is vital to note that green deposits don’t offer any additional tax deduction.
HDFC, on its green deposits, offers 6.15 percent for 33 months, which surges to 6.5 percent for 66 months and 6.6 percent for 99 months under the monthly income plan.
At the same time, the mortgage lender — on its regular deposits — offers 5.75 percent for 33 months, 6.3 percent for 66 months and 6.5 percent for 99 months under its monthly income plan.
Interest offered by HDFC on FDs under monthly income plan
| Tenure (months) | Interest on regular deposits (%) | Interest on green deposits (%) |
| 33 | 5.75 | 6.15 |
| 66 | 6.3 | 6.5 |
| 99 | 6.5 | 6.6 |
Union Bank of India (UBI) also offers 10 basis points higher on its green deposits. The UBI's website categorically mentions that Union Green Deposits (UGD) offer 5.4 percent plus 0.10 percent i.e., 5.5 percent per annum. The tenure for green deposits is 1,111 days.
The funds raised by UBI through these deposits take part in ESG (Environment, Social and Governance framework). These deposits are meant to be utilised towards environmental-friendly project and products subject to their availability.
Although difference between the two kinds of funds is marginal, but at the end of the day, green deposits do fetch a higher rate of interest.
Green FDs are a safe form of investment. They offer deposit insurance of ₹5 lakh, but only if issued by a bank. A green deposit offered by a non-banking financial company (NBFC) doesn’t assure deposit insurance by Deposit Insurance and Credit Guarantee Corporation (DICGC).
However, not every bank offers green FDs. So, if you are keen to open a FD, you might have to open an account with a new bank. Opening an account online, meanwhile, is not a hassle any more for depositors.