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Informist, Thursday, Mar. 13, 2025

 

--RBI Malhotra: Aim to estimate climate related risks impact on fincl system

--CONTEXT: Governor Malhotra's remarks at RBI seminar on climate change

--RBI Malhotra: To launch Climate Risk Information System later this year

 

NEW DELHI – The Reserve Bank of India wants to estimate the impact of climate-related risks on India's financial system, Sanjay Malhotra, central bank governor, said Thursday. "Over the short term, our goal is to be able to make a realistic estimation of the impact of climate-related risks not just on individual institutions but also on the financial system as a whole," Malhotra said at the RBI's seminar on Climate Change Risks and Finance in the national capital. "This would involve scenario analysis and stress-testing exercises, using both bottom-up and top-down approaches," he said.

 

Malhotra said the risk management framework in regulated entities for climate-related financial risks is still evolving. There is a need for concerted efforts to develop the risk management framework and build technical expertise for comprehensive assessment and mitigation of climate-related financial risks and the extent of losses due to such risks, he added.

 

At present, assessing the impact of climate-related financial risk is challenging because of the limited availability of data, Malhotra said, adding that there is lack of benchmark sectoral transition pathways and a country-specific carbon emission database. "These constraints limit our ability to make a comprehensive assessment of climate change risks. These limitations also constrain comparison of financial impact, as each Regulated Entity may use its own assumptions and models to process climate related dat," the governor said.

 

To address such constraints, the RBI in October announced the creation of a repository, the Reserve Bank – Climate Risk Information System, which would bridge data gaps. "These datasets include hazard data, vulnerability data, and exposure data related to physical risk assessment, sectoral transition pathways, and carbon emission intensity database related to transition risk assessment," he said. The RBI is working on this repository and the central bank expects to launch it later this year, the governor said. 

 

Malhotra called for coordination among financial sector regulators, companies, and government agencies to mitigate climate change risks. "We will collaborate and coordinate with the government and other regulators to ensure that there is harmonisation and consistency in rules, regulations, and our approach towards mitigating the impacts of climate change," he said.  End

 

Reported by Shubham Rana

Edited by Rajeev Pai

 

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