Green deposits: Should you invest in them?

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HDFC Ltd, the country’s largest mortgage lender, on August 17, launched a “green and sustainable” deposits programme. This comes at the backdrop of HDFC and the World Bank Group member IFC entering into an agreement to promote green housing in India through lending for affordable and low-income housing last month. Green Deposits are kind of fixed deposits launched with an aim to safeguard the environment from climate change.

Prior to HDFC Ltd, HSBC India had also launched a green deposit programme in 2020 for corporate clients.

Consumers in today’s world like what is socially conscious, and a growing number expect the companies they work with — banks and credit unions included — to accommodate their values. The trend is quickly penetrating into banking culture, moving beyond supportive statements to net zero emissions pledges and ‘green deposits’.

What are green deposits?

Green deposits are a means to actively involve customers in deciding where their deposited money will be loaned.

HDFC is planning to raise funds from retail investors to support financing of green and sustainable housing projects, including loans to developers and homebuyers.

The lender had already  disbursed over Rs 19,665 crores of home loans to 47,819 families in certified green building projects across the country as on March end.

Green Deposits of HDFC will offer investors a platform to fulfil their sustainability goals by investing your surplus cash balances into actions that matter the most.

“These fixed deposits will be directed towards financing of green and sustainable housing credit solutions and services,” HDFC said in a statement.

What is new for investors? 

HDFC said an individual can earn interest at 6.55% on deposits whose period can range from 3-10 years.

Typically, HDFC offers 6.65% interest rates on normal deposits. So, people who want to opt for “green and sustainable” deposits will get 10 basis points lower in terms of return on deposits, which translates to Rs 100 on a deposit of Rs 1 lakh.

Also, senior citizens will be eligible for an additional 0.25% per annum on their deposits of up to Rs 2 crore. Further, an addi­tional interest rate of 0.1% per annum will be applicable on these deposits up to Rs 50 lakh if the deposits are made through the company’s online platform.