View: Indian banks know climate is their biggest threat

economictimes.indiatimes.com:

Reserve Bank of India reviews the stability of the country’s financial system. Its latest report made for good headlines: The proportion of loans that have gone sour is at a multiyear low, and likely to decline further.
But buried in the report is a warning from the very institutions the central bank is charged with regulating. Market participants responded to a survey asking what they saw as the biggest contributors to systemic risk. While they downplayed the usual concerns — asset quality, interest rate risk, capital outflows — one particular threat loomed larger than ever before: climate change. In fact, respondents named it for the first time as the greatest source of systemic risk to the Indian financial system.

They’re not wrong to worry. It isn’t just that India, according to the Network for Greening the Financial System, will see sharply lower growth unless temperature rises are controlled. That growth will be more variable and subject to sharper shocks, including those from weird weather and delayed monsoons. This worries the country’s financial arteries; so does the uncertain fate of sectors such as construction, cement and energy, to which they are deeply exposed.

Indian regulators have been slow to respond. It wasn’t until earlier this year that the RBI finally released a draft framework that would require financial institutions to devise and disclose their strategies to mitigate climate-related risk. Even then, the timeline for adopting the new rules was exceedingly generous. For regular Indian banks,