India’s Reserve Bank (RBI) is gearing up to implement new regulations requiring banks and financial institutions to disclose climate-related financial risks associated with their lending portfolios. Building on a draft framework released in February 2024, these rules will mandate disclosures covering governance, strategy, risk management, and climate mitigation efforts. Initially, compliance will be voluntary starting in fiscal year 2027 (April 2027–March 2028), before becoming compulsory in fiscal year 2028. Banks will also be required to conduct stress tests to evaluate how extreme climate events—such as floods, cyclones, and heatwaves—might affect their borrowers under various scenarios.
The RBI’s guidance also calls for banks to quantify and report the greenhouse gas emissions of their borrowers, broken down by sector and asset class, based on a comprehensive 52-page methodology document shared with major lenders. While these disclosures may not immediately impact lending rates due to data limitations, they represent a major step toward embedding climate risk considerations into India’s financial system. This move aligns with India’s broader ambitions to achieve net-zero emissions by 2070 and demonstrates a growing commitment to sustainable finance. More