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Informist, Thursday, Sep 5, 2024

MUMBAI – The Reserve Bank of India does not intend to ask banks to reduce lending to any sector on account of climate change related issues, Governor Shaktikanta Das has said.

"We are not imposing any restrictions that you do not lend to this sector or...we are not doing that," Das said today at the FIBAC 2024 banking conference. "...we have no intention issue (restrictions) because we have to operate within the national priorities. We have no intention of, you know, sort of issuing any advisory to the banks not to lend any particular sector or anything," he further said, although he did add that the central bank has told lenders to take into account climate-related risks as part of the risk assessment process.

Chief Economic Adviser V. Anantha Nageswaran has often cited that energy security could be the biggest threat to India's future growth trajectory.

Experts globally have increasingly cited climate change as a growing risk for the financial sector. Closer to home, even the RBI in its 2023 Report on Currency and Finance – titled 'Towards a Greener, Cleaner India' – said that while the risks to financial stability from climate change were being recognised in addition to finding ways to reduce emissions to net zero, the issue's "non-linear and multidimensional" nature and the number of stakeholders involved meant there was "no easy solution".

On the subject of green finance, Das said today that a separate taxonomy was crucial for the sector's development.

"I think that is one area where India has to have a formal taxonomy structure to list out which are the green related lending which will be taken into account to treat them as green finance," Das said.

The development of a formal tax structure would boost the confidence of domestic as well as foreign investors, he added. When asked whether the central bank could include financing for electric vehicles under the priority sector lending umbrella, Das said that such a proposal had been examined in the past and multiple views had come up.

"There is an argument that yes, it should be included. There is also equally an argument that the prices (of electric vehicles) are also sometimes very high. So, therefore, who is going to buy it? It's the people who can afford."

"So, why should it be included in priority sector? Because the priority sector is targeted towards the bottom of the pyramid," Das said.  End

Reported by Sourabh Kumar

Edited by Akul Nishant Akhoury

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