CLIMATE change has a tremendous influence on the financial sector, either owing to physical risks such as a decrease in the value of collateral due to climate change happenings such as floods or due to transitional risks such as the downgrading of credit rating of high-emitting business establishments. In a proposal to make India's financial system resistant to climate-connected risks and assist Regulated Entities (REs) to deal with the matters of a warming planet, the Reserve Bank of India (RBI) is mulling over potential rules and regulations.
As a start, the central bank published a discussion paper on climate risk and sustainable finance in July 2022. At the same time, it also issued a survey report to underline whether commercial banks in India are equipped enough to cope with risks linked to climate change.
Regulated Entities (REs) refer to all kinds of banks given a license under Section 22 of the Banking Regulation Act, 1949, financial institutions, non-banking finance companies, payment system providers, and all authorized persons, including agents of Money Transfer Service Schemes (MTSS), etc. The RBI, while announcing the monetary policy decision in April 2022, had admitted that climate change may bring about physical and transition risks that could have consequences for the security and reliability of individual REs along with financial stability.
The RBI also mentioned that such entities should develop and execute an accurate method for understanding and evaluating the prospective effect of climate-relat financial risks in their business schemes and activities. RBI Governor Shaktikanta Das said that climate-related risks would be a focus area in times to come and the central bank would want to work on it collaboratively.
Esta historia es de la edición December 12, 2022 de India Legal.
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Esta historia es de la edición December 12, 2022 de India Legal.
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