MUMBAI: RBI governor Sanjay Malhotra on Thursday urged banks to strengthen risk management frameworks to address credit risks associated with emerging green technologies, which have limited reliability and efficiency track records. “Regulated entities need to develop suitable capacity and technical know-how to better appraise risks in financing projects using such green technologies,” he said at the Policy Seminar on Climate Change Risks and Finance in New Delhi.
Malhotra stressed the need for financial institutions to prepare for climate-related risks, which impact both individual entities and the broader financial system. “Climate-related changes are clear and visible. They are intensifying and threatening ecosystems, livelihoods, and economies,” he said, calling for collective action.
RBI is undertaking measures, such as stress testing and scenario analysis, to assess the financial impact of climate risks. “Our goal is to make a realistic estimation of climate risks on the financial system. This requires comprehensive assessment, which is no easy task,” he said. To bridge data gaps, RBI is developing the Reserve Bank — Climate Risk Information System (RB-CRIS), which will provide standardised datasets on climate risks, including hazard data, sectoral transition pathways, and carbon emission intensity data.
To promote climate financing, RBI has included small renewable energy projects in priority sector lending to ensure credit access for green initiatives. However, Malhotra noted that a lack of bankable projects remains a challenge. “Creation of a common pool of such projects will have multi-fold benefits for the ecosystem,” he said, urging financial institutions to collaborate.
He also highlighted global coordination efforts, pointing to the Network for Greening the Financial System (NGFS), which provides technical guidance for managing climate-related financial risks. “We will continue working to build a financial system that can withstand future climate shocks and contribute to India’s sustainable and resilient future,” he said.
RBI plans to introduce further initiatives, including a dedicated cohort on climate change risks under its Regulatory Sandbox programme and a special ‘Greenathon’ focused on sustainable finance. Malhotra called for greater collaboration among financial institutions, regulators, and urged govt to ensure a harmonised regulatory approach.