India accelerated its push towards low-carbon economic transformation by giving more weight to renewable energy plans in priority sector lending. The step towards ramping up green lending was highlighted by Reserve Bank of India (RBI) Governor Sanjay Malhotra at a policy seminar on Climate Change Risks and Finance.
He mentioned that while central banks of the advanced economies have thus far remained asset-neutral, techniques of directed lending are adopted by emerging economies such as India in order to fulfill the demands of national development.
“We have placed finance for small renewable energy projects, solar, biomass-based, windmills, micro-hydel plants, and public utilities based on non-conventional energy like street lighting systems and remote village electrification, under priority sector lending,” he added.
Addressing the broader role of central banks in tackling climate-related financial risks, Malhotra acknowledged the ongoing debate on their involvement in green finance. However, he emphasized the RBI’s commitment to mitigating climate risks by fostering a conducive regulatory framework and supporting capacity building in green finance.
Bridging Data Gaps for Green Finance
Uncovering data flaws in climate financial risk modelling, RBI initiated Reserve Bank – Climate Risk Information System (RB-CRIS) last October. The repository would bring about homogeneity of data utilized to undertake physical and transition rik evaluations, i.e., hazard mapping, carbon intensity monitoring, and sectoral transition paths. Malhotra announced that the development on RB-CRIS is under process and its implementation will occur later this year.
Innovation and Regulatory Push
In order to encourage green finance, RBI is also expanding the size of its Regulatory Sandbox program, creating an ‘on-tap’ cohort for climate risks and conducting a special ‘Greenathon’ for climate fintech solutions.
Besides, India is gravitating towards international climate risk disclosure norms. The RBI has already issued draft guidelines on disclosures related to climate-related financial risks and invited stakeholder comments. It is also in the process of developing a guidance note on Climate Scenario Analysis and Stress Testing to facilitate climate risks mainstreaming across financial institutions.
Global Momentum on Green Finance
Malhotra referred to the increasing global attention to disclosures of climate risk. Institutions such as the International Sustainability Standards Board (ISSB) and Basel Committee on Banking Supervision (BCBS) are designing frameworks to drive financial disclosure towards managing climate risks.
These developments put India in impressive strides towards embedding green finance within its financial system further solidifying its vision for sustainability and climate resilience.
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