
RBI urges lenders to create common pool for green projects
green projects to boost flow of climate-related financing.
The central bank has also proposed to set up a dedicated “on tap” cohort on climate change risks and sustainable finance under its Regulatory Sandbox initiative.
Governor Sanjay Malhotra on Thursday said that the lack of bankable green projects slowed the adequate flow of credit and a collaborative approach could address this constraint.
«Capacity and expertise constraints limit the ability to appraise and thus finance climate change mitigation. It also enhances the risk of funding such projects. Thus, creation of a common pool of such bankable projects will have multi-fold benefits for the entire ecosystem,» Malhotra said at a seminar on climate change risks and finance organised by the central bank in New Delhi.
He stressed upon capacity building and improving technical know-how to better appraise risks in financing projects which use green technologies.
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Lending to green projects is typically associated with higher credit risk due to borrowers’ use of new and emerging green technologies, which have relatively limited track record in terms of reliability, efficiency, and effectiveness.
«There is a need for collaboration in this emerging and evolving area. I urge the regulated entities to seriously consider setting up such a pool through an appropriate institutional arrangement.»
Sharing of knowledge would benefit all the lenders.
The Indian regulator has also been encouraging innovations through its regulatory sandbox and hackathon initiatives in the Fintech space.
«We propose to set up a dedicated “on tap” cohort on climate change risks and sustainable finance under RBI’s Regulatory Sandbox initiative. We are also planning to conduct a