Indian bankers review climate risk data in a meeting.
Major banks in India are facing increasing scrutiny as they disclose more climate-related data but fall short of integrating this information into their core lending decisions. Despite growing physical climate risks, such as floods and extreme heat, which directly impact bank portfolios, few institutions are conducting climate stress tests or actively phasing out lending to the coal sector.
The Reserve Bank of India (RBI) has been instrumental in providing the necessary data frameworks for climate risk assessment. However, the central bank has not yet mandated specific disclosure requirements, leaving banks with a degree of discretion that appears to be hindering proactive risk management.
This delayed action poses significant risks to the Indian financial sector. Without robust integration of climate considerations into lending and investment strategies, banks are exposed to potential financial instability and the threat of stranded assets as the physical impacts of climate change intensify and regulatory landscapes evolve globally.
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