RBI to issue green guidelines

February 14, 2023|Written by |Reserve Bank of India

The Reserve Bank of India (RBI) will soon issue green guidelines for regulated entities, the central bank’s governor has said.

In a statement earlier this month, Shri Shaktikanta Das said that “being a full-service central bank with financial stability as part of its mandate, the Reserve Bank recognises that climate change can translate into climate-related financial risks for regulated entities which can have broader financial stability implications”.

The RBI will issue three separate guidelines providing a framework for how Indian banks may accept deposits invested in green activities, another framework for disclosing climate-related financial risks, and guidance related to climate scenario analysis and stress testing. The guidelines will be issued in a phased manner, Das said.

The governor’s statement comes after the RBI issued a discussion paper on climate risk and sustainable finance in July 2022, which was broadly aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures.

As climate advocates from WWF have noted, banks in India “suffer a relatively high climate physical risk”. In 2019, India was the seventh most-affected country, according to the Global Climate Risk Index published by GermanWatch, with more than 2,000 climate-related fatalities and losses of nearly US$70bn. Accordingly, WWF notes that India could be exposed to green swan risks, “rare, unexpected events with extreme impacts which could trigger the next systemic financial crisis”.

The RBI currently has a D rating on the Green Central Bank Scorecard. Although it received high marks for research and advocacy, it did not perform as well on monetary and financial policy.

This page was last updated February 14, 2023

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