“Financial institutions all over the world are incorporating ESG criteria into their investment and lending choices, illustrating a growing recognition that sustainable businesses are more adaptable, profitable, and aligned with the values of a more conscious consumer base. More importantly, the global sustainable finance market is expected to grow from USD 3.6 trillion in 2021 to USD 23 trillion by 2031, and sustainable finance has begun to acquire considerable momentum in India in recent years as the public’s recognition of the need for sustainable development has grown. Additionally, it’s worth noting that the G20 New Delhi Leaders’ Declaration issued during India’s presidency reaffirmed the G20 leaders’ commitment to take action to expand sustainable finance,” said Swaminathan.
The Reserve Bank of India, for its part, has actively promoted the importance of green and sustainable finance within the banking sector. This effort has included a variety of guidelines, instructions, and publications aimed at raising awareness of the benefits and drawbacks of sustainable finance. As early as December 2007, the RBI advised six banks to develop board-approved plans of action to support sustainable development, emphasising financial institutions’ central role in this endeavour.
On talking about the priority sector lending and financial inclusion, he added, “In response to changing economic landscapes and national priorities, the composition of priority sectors and their associated targets has evolved. It began with agriculture and small-scale industries, but it has since expanded to include MSMEs, education, renewable energy, and other areas, as well as applying to a broader range of banks. The priority sector lending guidelines were last updated in September 2020, introducing various changes such as credit for start-up loans, increased targets for small and marginal farmers and vulnerable groups, and harmonising instructions for different types of banks. Banks, for their part, have made significant progress in meeting priority sector lending targets, with a 44.7 percent achievement rate as of March 31, 2023. Nonetheless, credit gaps persist in sectors such as MSMEs, women entrepreneurs, and agriculture, highlighting the importance of priority sector lending”
Moreover, several significant changes and expansions to India’s Priority Sector Lending policies were implemented in order to promote key sectors and address critical societal needs. In 2015, ‘Renewable Energy’ was included as an additional category under Priority Sector Lending in order to promote the production and utilisation of renewable energy sources such as solar, wind, and others. Subsequently, applicants received loans of up to 15 crore for purposes such as solar-powered generators, micro-hydel plants, and non-conventional energy-based public utilities. According to him, “individual households could borrow up to ten lakh rupees per borrower”.”Priority sector lending acknowledges that social infrastructure plays a significant role in raising living standards and tangentially promoting economic growth since priority sector lending loans of up to 5 crore per borrower are available for initiatives such as the establishment of schools, drinking water facilities, sanitation facilities, and household-level water improvements. Loans of up to 10 crore per borrower for the construction of healthcare facilities, including those under ‘Ayushman Bharat,’ in Tier II to Tier VI centres are also included in this category” Swaminathan concluded.
