Green FD

A green fixed deposit is a fixed-income instrument for investors looking to invest their cash reserves in sustainable and eco-friendly initiatives. Like a regular FD, you deposit a lump sum with a bank and earn a fixed interest on it. However, in this case, the deposit proceeds are used to finance projects under the United Nations Sustainable Development Goals (SDGs). These include green transportation, renewable energy, waste management, etc.

The idea behind the green fixed deposit schemes is straightforward – banks use these deposits to issue loans that support ESG (Environmental, social, and governance) projects.

For corporates, Green FDs serve the purpose of integrating the sustainability agenda into treasury activities. So, if you operate a business with limited options to invest in environmentally beneficial initiatives, green FDs can prove to be an ideal choice.

In 2020, HSBC became the first foreign bank in India to announce the launch of a green fixed deposit scheme, entering a club of a select few global banks to bring forth this proposition.

Besides HSBC, HDFC, DBS, Federal Bank, Union Bank, IndusInd Bank etc., are other banks that offer such a scheme.

• Both retail and corporate customers can invest in a green fixed deposit and earn assured returns.
• The interest rates vary from bank to bank. However, senior citizens are eligible for a 0.25% extra interest rate for deposits up to Rs. 2 crores.
• An additional 0.1% interest rate per annum will be applicable on deposits up to Rs. 50 lakhs if you make deposits online.
• The tenure of the green FD ranges from 18 months to 10 years, depending on the bank.
• Premature withdrawal is allowed after the first three months of account opening. If you are an individual investor and withdraw funds after 3 months but before 6 months, the interest you earn will be a flat 3%, regardless of applicable rates. However, premature withdrawals in the case of non-individual investors will attract no interest.
• On premature withdrawals after six months of account opening, a penalty of 1% is charged. Your deposits will attract a 1% lower interest than the applicable rates.
• Further, if you opt to withdraw prematurely after six months since account opening, your green FD will be converted to a regular FD.  
• Deposits of up to Rs 5 lakhs are insured. 
• You can avail of an overdraft facility against the green FDs as well. However, on availing of such a facility, the green FD gets converted to a regular FD.

Disclaimer: The aforementioned features are only indicative. Exact features and benefits may vary for different financial institutions. Investors are advised to confirm the same from the concerned institution before investing.

Climate change has led to unprecedented temperature increases and disrupted weather patterns in India and worldwide. Hence, investing in projects that are ESG-sensitive is crucial to fulfilling your duties as responsible global citizens. Green FDs fit the bill perfectly as they assure fixed returns and ensure that your capital contributes to the country’s greater socio-economic good, thus putting your money to work in more ways than one.