The Reserve Bank of India (RBI) has joined a group of central banks and financial supervisors working to improve the green credentials of the sector. By adding its name to the Network for Greening the Financial System (NGFS), the RBI brings membership to 90 institutions.
In a press release announcing the move, the RBI said that it expects to benefit from NGFS membership “by learning from and contributing to global efforts on green finance.”
In joining the NGFS, the bank fulfills one of the recommendations of a substantial 2020 report from its own researchers. The report found that the macroeconomic effects of climate change are already statistically significant for India and that food price inflation is particularly affected. India’s weather patterns have changed significantly in recent decades, and this has had a strong impact across a range of key economic indicators.
In response, the report recommended that the RBI target green finance and asset purchases, redesign capital and collateral rules to provide incentives for green lending, and fully incorporate climate risk into the analytical models used in policy formulation. However, NGFS membership is the only recommendation that has been implemented so far.
As the RBI’s late arrival to the NGFS demonstrates, the bank has been slow to recognise climate risk and to adapt its operations to the transition away from carbon. In a recent study of central banks and financial supervisors’s climate policies, India ranked 15th out of the G20 nations, behind the US and far behind Europe and China. The RBI’s poor performance is in stark contrast to that of the People’s Bank of China, which led the rankings and was a founding member of the NGFS.
Climate change is making the Indian monsoon season more chaotic, with summer monsoon rainfall becoming stronger and more erratic. In 2018, Germanwatch’s Global Climate Risk Index ranked the country as the fifth most affected by climate change due to extreme precipitation and temperature events.
This page was last updated May 6, 2021
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