State-run lenders to work on climate risk metrics

economictimes.indiatimes.com:

climate risk assessment metrics as part of a broader strategic roadmap outlined by the government to maintain their growth and profitability momentum.

The finance ministry is likely to hold a review, later this month, on performance of public sector lenders in the backdrop of a three-year strategic roadmap, a government official told ET.

The move is in line with increased focus globally on the challenges posed by climate change and the need for building financial sector resilience and readying state-owned lenders for the next leap.


«Globally, there is a shift towards incentivising companies with low carbon footprints,» another official aware of the development said. «PSBs (public sector banks) also need to factor in environmental, socioeconomic, and governance (ESG) issues while doing credit assessment and include climate risk as a part of risk assessment policy,» the person added.

The country's largest bank, State Bank of India (SBI) has already started identifying climate risks that have the potential to generate substantive change in the business.

Operational Synergies
The three-year strategic roadmap (FY24-FY26) for PSBs also focuses on bringing greater synergy in operations.

The government wants lenders to continue with the growth and profitability momentum achieved in the last two years. «We want lenders to build new business models to sustain momentum,» an official said, adding that the review meeting for each lender will be held separately.

«We want champion banks to explore new avenues and lead smaller lenders with best practices,» the person said.