India has been suffering from pollution problem since long. Major contributors in it being Industries. To reduce it was Introduced Green Credit system, according to which Credits were given to companies if they did environmental preservation activities or put efforts from their own side. Not just that, in energy sector, Carbon Credit was Introduced to reduce Carbon emmission.

The Companies could spend these points in domestic markets in return for money. The companies with more Green Credits would be given preference and reduced interest rates on loans (Not compulsory and were rarely given).

This system has its flaws, because two currencies that complement each other will cause confusion, also it gives no reason to banks to prefer Companies with high Green Credits over others.

What I think should be done is:-

1. Merge GCP (Green Credit) and CC(Carbon Credits)- We can form a single currency that is applied in all sectors, lets call it "Green Points". If they are merged, it must be done in a uniform manner because 1 tree planted is not equal to reduction of 1 ton CO2. So it should be done in a standardised way i.e 1 Green Point on Planting these many trees, or 1 Green Point for reducing this much amount of Carbon, such that merger becomes possible even with different units.
2. Green Points Trading System- The biggest thing we can do is enable the trade of these points with banks. The companies can offer these points to reduce Interest rate on loan, the depriciation in interest rate can be decided mutually. The banks in this system should be able to accept and use these points as well.
3. Banks on Green Points- Banks should be further able to use these points in folowing cases:-
   For example- If a bank gave a loan to a person or company but it defaulted and even after auctioning all its assets, it is not able to recover its total amount with interest, in that case the banks will be able to sell these Green Points to other banks or RBI to get back its full money.

Another way in which they can use it is that the RBI provides Liquidity Adjustment Facility (LAF) which are short term loans to banks at repo rate, these banks can trade these points with RBI to lower the interest rate from the repo rate (Not Extremely, but substantially)or to increase the time for paying loan, both the sides can mutually negotiate on how much to reduce the rate or increase timeline of loan repayment.

This way I think we can motivate even private banks to prefer to give loans to environment friendly companies and contribute to a better environment.

The biggest advantage of this is that the Banks which currently rarely consider GCP or Carbon Credits because they are of minimal use to them, they too will get a way to use these points in crucial times to cover their losses and hence giving them a reason to promote companies with more Green points.

What do you think about this reform proposal of mine. Feel free to tell me yur views on it in the comment section.

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