- विज्ञापन -
New Delhi: India has taken a pioneering role in financing renewable energy projects by integrating them into the “priority sector lending” framework, which supports the country’s transition to a low-carbon economy in the battle against climate change, according to Reserve Bank of India (RBI) Governor Sanjay Malhotra.
Speaking at a policy seminar on Climate Change Risks and Finance, Malhotra noted, “Central Banks in Advanced Economies have traditionally adopted an asset-neutral approach, whereas Central Banks in emerging markets and developing economies, like India, have implemented directed lending policies to direct credit to key sectors based on their specific development goals.”
Malhotra emphasized that India’s priority sector lending guidelines enable financing for small renewable energy projects, such as solar, biomass, wind, micro-hydel plants, and public utilities based on non-conventional energy sources, including street lighting and rural electrification projects. He highlighted that these initiatives play a crucial role in accelerating India’s green energy ambitions.
The RBI Governor acknowledged the growing recognition of central banks’ roles in managing climate risks to the financial system. However, he pointed out that the debate around their involvement in facilitating green and sustainable transitions continues to evolve, with various dimensions of the issue.
As the central bank of India, Malhotra said the RBI is focused on mitigating risks posed by climate change to the financial system and facilitating green financing. He mentioned that green lending faces challenges, particularly due to the higher credit risks associated with emerging green technologies, which lack extensive track records. Malhotra stressed that financial institutions must develop the necessary capacity and technical expertise to assess risks involved in funding such projects.
Malhotra also discussed the importance of climate-related financial risk modeling, which requires extensive data, much of which is currently unavailable. To address this gap, the RBI launched the Reserve Bank – Climate Risk Information System (RB-CRIS) last year, which aims to provide standardized data on physical risks, sectoral transition pathways, and carbon emission intensity. This repository, which is expected to launch later this year, will help bridge data gaps in climate risk assessments.
Highlighting the crucial role of technology and finance in the transition to a low-carbon economy, Malhotra emphasized the need for innovative solutions in these areas. The RBI has been promoting innovation through its Regulatory Sandbox and Hackathon initiatives in the fintech sector.
The RBI Governor also announced plans to establish a dedicated “on Tap” cohort focused on climate change risks and sustainable finance under the Regulatory Sandbox initiative. Additionally, a “Greenathon” will be organized to address climate-related challenges.
Malhotra noted that several countries are already working on assessing and disclosing climate-related risks. International bodies, including the International Sustainability Standards Board (ISSB) and the Basel Committee on Banking Supervision (BCBS), have issued guidelines on climate risk disclosures. In line with this, the RBI has proposed draft guidelines on climate-related financial risk disclosures, which are currently open for public comments. The final guidelines are being prepared, and a guidance note on Climate Scenario Analysis and Stress Testing for regulated entities is also in development.
