Banks propose fund for low-carbon projects

In an effort to increase financing for environment-friendly projects, banks have proposed a 0.5 per cent cess on high carbon-producing projects to create a fund that will provide resources for green projects.

Interacting at a seminar on climate change and finance organised by the Indian Bank’s Association (IBA), bankers said there was a need to impose a disincentive on activities that emitted carbon amounts higher than stipulated standards. The money thus generated could support projects that had a low carbon intensity but were not viable, they pointed out.

IDBI Bank Chief General Manager Yashpal Gupta said Reserve Bank of India (RBI) and IBA could take initiatives for this proposal. Later, an IBA official said it was an idea that was still at a nascent stage and that the association would discuss the same with its members.

Banks have also sought priority sector lending (PSL) status for environmentally sustainable projects. Many banks, especially public sector banks, would come on board (to fund green projects) to meet their PSL obligations, the IBA official added.