Lenders facing known and unknown challenges, need agile responses: Bank chiefs
State Bank of India (SBI) chairman Dinesh Khara said it is clear that the climate risk is going to be much more pronounced and significant in the years ahead, but banks are facing challenges in funding green projects.
«Multilateral agencies are unable to honour their commitments in green financing due to the situation they are facing in their home countries. In this situation, banks will have to step in.
It will be good if regulations include some incentives like CRR (cash reserve ratio) cuts for raising green funds or risk weight reliefs for green financing,» Khara said.
Cash Reserve Ratio (CRR) is the amount of deposits banks have to compulsorily set aside with the Reserve Bank of India without earning interest. It currently stands at 4.5%.
Exemption from maintaining CRR on funds raised through green financing will make it cheaper for banks. Similarly, lower risk weights for green financing will lower capital costs.
Khara said that besides the near-term geopolitical complexities of the wars in West Asia and Ukraine and the resultant impact on supply chains and financing, climate change is a medium-term challenge facing banks.
HSBC India CEO Hitendra Dave said though technology has made banking easier, the risks are sometimes unknown.
He cited the example of the ransomware attack on the world's largest lender by assets Industrial and Commercial Bank of China (ICBC) earlier this month which forced the bank to re-route trades using spreadsheets stored on portable drives and accessing the internet using dongles.
«The truth is that though banks can move money swiftly if systems are working as expected, if anything changes then the money can easily go to someone else. We can naturally manage credit risk but not
