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GREEN FINANCIAL INSTITUTIONS AND BANKS

This Article is written by Shivani Sharma, Student of Vidhyadaini Institute of Science Management and Technology.


In a very layman’s term, Green banks are part of initiation that support our mother earth’s extinguishing environment and insist on side-lining the traditional culture of banking. With the time passing we are well versed in the fact that our mother earth is losing its key charm that is its water due to poor drainage facilities, vegetation due to concrete jungles, oxygen as Carbon-di-oxide is increasing, the glaciers at poles are melting and what not. Green bank was in initiation that provides loan to all those organisations which directly or indirectly work or are somehow planning to work in a manner such that it may promote good growth of nature or it may carry out its operation in such a manner which may prove to be eco-friendly, hence it may not affect the nature what-so-ever in a negative manner.


Green banking was initially introduced in the State of Florida in 2009. But the potential idea was developed in 1969, the main idea was to establish a mechanism which is environment friendly and hence NEPA (National Environment Act, 2014) was established in the United Nations.

In India it was introduced by State Bank of India being the largest commercial bank in India it invested in the Wind project at Coimbatore, hence this was the first recorded project in India under Green Finances.


Banks in field

In April, 2010 State bank of India became the first bank to venture in a windmill project which was to produce electricity, the main reason for the investment was to reduce carbon and thermal investment in the production of electrical energy.

In an interview with The times of India, State bank of India chairman OP Bhatt stated that, “In India 100 MW per year is the total consumption of electricity of banks”. He added to reduce that huge consumption as to reduce carbon footprints”. The total cost for the installation of a mill was 10 crores, it was estimated that the cost will be covered within the time of 4-5 years, and the minimum cost for production was estimated close to 0.

In the interview, CMD of Suzlon stated that there has been a discussion going on with 25 other banks for further same investments.

Green financing or Green bank is something which makes primitive economic studies real, the assumption that all the money in an economy is flowing via banks and there is no circulation of hard cash.


Featuring banks

The RBI being the central bank sensitized the public, regarding needs and challenges of green financing through its regular reports and by generating communications. Also, since the communications are generated by the government, people relied more on such information. As a result, a large number of investments were made from only advertisements made by the government.

Unlike other banks and financial institutions, Green Banks and financial institutions also focus on exchange of money, lending & investment but all that in such a way that it does not cause any harm to the environment.

The exchange of money, lending & investment all are done in paperless manner along with low interest rates and other add on benefits are also provided.

The investment by Green banks are only made in such projects which cause less or no harm to the environment either in the long or in the short run.

Green banks provide Assistance loans to those institutions which directly or indirectly contribute to sustainable development. Banks use public and private funding to incentivize clean energy.

Its main function was to regulate the financial flow from private government and to the semi-governmental sector, and also one of its main functions was to prioritise sustainable development. Green financial institutions are just like traditional commercial bank the work is same but the mechanism is quite different, some basic characteristics of such institutions are-

  1. They provide loans at lower interest rates, to the institutions that have plans to consider the environment sustainably.

  2. They provide saving account facility and a part of their saving is donated as donation for environment

  3. They Provide green credit cards which have rewards and also the cards are biodegradable unlike other banks plastic cards.

  4. They provide Green mortgage facilities with higher liquidity rates as compared to other commercial banks also providing bigger loans for development of houses that may run on sustainable fuels.

  5. Mobile & online banks which involve paperless, mail-less works, one does not need to travel to bank branch offices which indirectly have a positive effect on the environment.

  6. They also provide green bonds, in 2018 they constituted about 0.7% of all bonds issued in India. Decoding the Indian market, green bonds provided Indians a way to earn income also it helped them to exempt the tax slab.


India going financially green

Green financing was introduced to the world in order to accelerate decarbonisation. Its main function was to regulate the financial flow from private government and to the semi-governmental sector, and also one of its main functions was to prioritise sustainable development.

The World Bank became the first to introduce the first green bond in November, 2008.Banks like Yes Bank raised Rs 5 billion to enhance long term resources. It also funded various renewable energy and infrastructure projects.

In India, State Bank of India being the largest commercial bank took over setting high standards and implemented Green Channel Counter (GCC). In 2010, SBI branches provided green loans which intended to finance or refinance environmentally-friendly green projects to increase energy efficiency in your house and provide cost savings.

SBI Green Remit Card is a simple Magstripe based card without PIN. The product is targeted to facilitate Non-Home Cash Deposit Transactions to be routed through Green Channel Counter (GCC)/ Cash Deposit Machine (CDM) Card can be used for deposit of Cash (INR) to the designated beneficiary's SBI account.

On world earth day in 2019 SBI started Green car loans, that provided 90% of the Vehicles at on road prices in form of SBI finances without processing fees and at subsidised rate of interest.

India started issuing green bonds in 2015, in February 2020 outstanding bonds stood approximately $16.3 billion. As per RBI, Green bank is internal banking with IT infrastructure as efficiently & effectively as possible, RBI introduced green rating standards for Indian banks which were termed as Green Coin Rating (GCR).

Dr. Atiur Rahman was known as green governor. He inaugurated green banking policy and guidelines regulating green financing in 2011, and strictly followed up those banks and financial institutions to implement the policy accordingly. He was appointed 10th Governor of the Bangladesh Bank on May 1, 2009, and served it for about seven years till March 2016.

Other banks also have launched various initiatives towards green financings like, Yes Bank raised Rs 5 billion to enhance long term resources. It also funded various renewable energy and infrastructure projects, along with community development initiative, Indusland bank setted up solar ATMs which run on solar power instead of electricity.

Renewable energy and energy efficiency was one of the projects that India invested in, it was estimated that India by 2030 will 50% depend on coal and thermal electricity production, also by 2040 power sector will result 80% of carbon emission for India’s total carbon foot-printing, apart from that in 2022 India is the 3rd country to produce greenhouse gas after US and China so India in 2018 set up solar energy panels and produced approximately 175 GW of electricity through renewable resources, although this was 38% of what was promised within the 75% of time, but still it is estimated that India will reach its goal estimably with in the time of 4- 5 years.


Conclusion

With the above reading we can conclude that Green bank or Green financing is not a mere bank, but it is more like a feature since nowadays lots of banks have the same feature. The main reason for the Green Financing project was to rate industrial emissions within a specific sector on the basis of their environment friendliness. The World Bank issued green bonds towards several projects.

Green financing is an environment friendly move motivating innovation and scientific implications, since if one needs to get finances for their industrial idea, they can easily with a potential investment in welfare for the environment can get the same. Apart from that it was necessary because our earth is also getting depleted day-by-day, so anything with a bit of effort and investment that can save mother nature can help.

Apart from that, sciences in the current era are advanced enough that, if one truthfully implies any methodology or any kind of innovation, earth can be saved to a far extent.

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