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Kolkata: Reserve Bank of India (RBI) Governor, Sanjay Malhotra, on Thursday, urged lenders to create a common pool of bankable green projects so that initiatives at the forefront of fighting climate change receive adequate financing and expertise.
“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.
The lack of bankable green projects slowed the adequate flow of credit, and a collaborative approach could address this constraint, he said.
Malhotra also proposed a dedicated “on tap” cohort on climate change risks and sustainable finance under the central bank’s Regulatory Sandbox initiative.
He stressed upon capacity building and improving technical know-how to better appraise risks in financing projects that use green technologies.
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.
