RBI Climate Risk Disclosure Norms: Malhotra’s Announcements
Why in the news
RBI Governor Sanjay Malhotra said the central bank is nearing final climate risk disclosure rules and a guidance note so lenders can run climate stress tests.
Key facts
- Disclosure norms: regulated entities must lay out governance, risk assessment, mitigation and monitoring of climate-related financial risk.
- The draft framework went for public consultation in February 2024; feedback is being folded into final guidelines.
- Stress testing guidance will cover scenario-based analysis, using bottom-up and top-down approaches.
- Entities will be urged to build a common pool of bankable green projects, shared among experienced climate financiers.
RBI’s green finance role
- Acts as a facilitator for capacity building and an enabling regulatory framework.
- Issued the Framework on Acceptance of Green Deposits.
- Bringing small renewable energy projects into priority sector lending.
Short-term action plan
- Realistically assess climate risks at institution and system level.
- Carry out stress tests.
- Strengthen technical skills for green technology finance and encourage sustainable finance innovation.
New initiatives
- Regulatory Sandbox ‘On Tap’ cohort on climate risk and sustainable finance.
- A special ‘Greenathon’ to spur innovation.
Significance
- Climate risk affects corporates, MSMEs and agriculture too, so regulators, entities and government must coordinate.
- Aims: stronger assessment capacity, transparent climate finance and a low-carbon transition.
Exam angle
- Governor: Sanjay Malhotra.
- Related: Green Deposits framework, priority sector lending, regulatory sandbox.