The Reserve Bank of India (RBI) is making a bold move to align India’s financial sector with global climate goals. Starting FY 2027, banks and major financial institutions will be asked to voluntarily disclose climate-related financial risks. From FY 2028, these disclosures will be mandatory.
This is part of a structured approach to understand how banks manage risks from climate change and how it impacts their lending and investments.
🔍 What Does the Framework Include?
A four-pillar structure:
1. Governance
2. Strategy
3. Risk Management
4. Metrics & Targets
Banks will need to:
Report emissions financed through loans (Scope 1, 2, 3)
Conduct stress testing under different climate scenarios
Set short-term and long-term emissions targets
🕒 Timeline of Implementation
FY 2026–27: Voluntary disclosures for governance, risk, and strategy
FY 2027–28: Full voluntary disclosures including emissions and targets
FY 2028–29 onwards: Mandatory disclosures for all major banks
Urban Co-operative Banks (Tier IV): Given extended timeline
🎯 Why This Move Matters
Financial Stability: Helps RBI track and control risks from climate shocks
Data Transparency: Encourages banks to develop better climate risk models
Investor Confidence: International investors increasingly look for ESG-compliant banks
Regulatory Alignment: India joins global efforts like TCFD and NGFS in green finance standards
Vizzve Finance Insights
📌 1. Banks Must Invest in Tech
Banks will need climate data tools, risk analytics engines, and ESG-trained teams to comply.
📌 2. Borrowers Face Stricter Scrutiny
High-carbon companies could face tighter credit terms or be required to share sustainability plans.
📌 3. Green Lending Could Rise
This move incentivizes banks to prioritize loans for renewable energy, electric vehicles, green infrastructure, etc.
📌 4. Climate Disclosures = Competitive Advantage
Banks ahead in ESG will attract more investors and global funding in the long term.
❓ Vizzve FAQs
Q: What exactly are climate-risk disclosures?
They are structured reports by banks on how their lending and investments are exposed to climate risks—like floods, droughts, policy changes, or technology shifts.
Q: Will this affect everyday borrowers?
Not immediately. But over time, businesses may see interest rates or loan terms tied to how eco-friendly or future-ready they are.
Q: Why is RBI doing this now?
To align India’s financial sector with its Net Zero 2070 goals and strengthen the banking system’s ability to weather climate shocks.
📣 Final Word from Vizzve Finance
India’s financial climate is changing—literally. With climate-risk reporting becoming mandatory, banks will shift from just profit-driven models to planet-proof portfolios. At Vizzve Finance, we help you stay ahead of these shifts—so your money always aligns with the future.
Published on : 18th July
Published by : SMITA
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