Banks should have aspects of climate resilience in all products, say industry experts

in June 2024, RBI DG deputy governor Michael Patra said that the central bank is exploring appropriate coverage for green deposits.

Banks in India must look at the implementation of climate resilience elements in their products, National Bank for Agriculture and Rural Development’s (NABARD) Chairman Shaji Krishnan V said. Highlighting the need for climate resilience in the larger financial services industry, Shaji said at the annual event of Federation of Indian Chambers of Commerce and Industry (FICCI) and Indian Banks’ Association (IBA) that banks here should have products catering to climate resilience needs but all products should have some elements of climate.

Highlighting how banks globally work on these aspects, Sanjay Gurjar, Co-Head, Banking and Coverage, India and South Asia, Standard Chartered Bank said that banks are contributing some things and products towards climate resilience but there is a need to do more.

Echoing this, Madhav Nair, Country Head and Chief Executive Officer, Bank of Bahrain and Kuwait, big banks and entities are working on these aspects but some mid-sized banks need to work. “Banks need to create models on climate resilience. Big banks and entities like the State Bank of India (SBI) and others have something,” Nair said.

Push from the regulator

In April 2023, the RBI announced the framework for acceptance of “green deposits” of regulated entities. The idea was to foster and develop a green finance ecosystem in the country, the central bank said.

Under the framework, regulated entities can offer green deposits to customers, protect interest of the depositors, aid customers to achieve their sustainability agenda, address greenwashing concerns and help augment the flow of credit to green activities/projects, it said.

And in June 2024, RBI DG deputy governor Michael Patra said that the central bank is exploring appropriate coverage for green deposits. "We are exploring appropriate coverage for green deposits, climate-risk based differential premiums and ex ante funding needs for climate sustainability," Patra said at the 79th Executive Committee Meeting of the International Association of Deposit Insures (IADI) at Rome in Italy on June 14.