PSBs intend to establish “green cells” for climate funding

For climate-specific projects, state-run lenders will try to establish specialised “green cells” with committed staff. The Enhanced Access and Service Excellence (EASE) legislation version 7.0, which went into effect last week, includes these elements. A senior bank executive emphasised that in the fiscal year 2025, Public Sector Banks (PSBs) will prioritise enhancing their capabilities for raising green funds and expanding their green lending portfolios. These efforts include setting up specialised units to address both physical and transition risks within existing and potential loan portfolios, as well as assessing environmental, social, and governance (ESG)-related risks using data analysis.

A report by the Reserve Bank of India (RBI) estimates that the country’s annual green financing needs will amount to at least 2.5% of GDP until 2030. Earlier this year, the RBI released draft guidelines for a disclosure framework on climate-related financial risks in 2024, outlining a pathway for regulated entities (REs) to disclose detailed information regarding governance, strategy, risk management, and metrics and targets.

Banks are advocating for increased incentives to promote green financing, including green deposits. State Bank of India chairman Dinesh Kumar Khara stated earlier this year that they have approached the RBI to request relaxation of the cash reserve ratio (CRR) requirement for green deposits. He emphasised the importance of incorporating such measures into the regulatory policy framework to support green initiatives in the banking sector.