RBI likely defers plan to mandate climate risk disclosures by banks

India's central bank has put on hold plans to ask domestic lenders to disclose and manage risks from climate change, three sources directly familiar with the discussions said.

Getting a ‍better idea of climate-related risks and green investments ​is a central part of global efforts to move to a low-carbon economy, with countries from the UK to Japan making such disclosures mandatory for financial institutions.

However, the focus on climate risk has eroded globally since the re-election of U.S. President Donald Trump.

The Reserve Bank of India's (RBI) proposed norms, which had been under discussion with banks since 2022, were expected to require banks and financial institutions to regularly disclose climate-related risks in their loan portfolios, as well as mitigation strategies and targets.

According to draft ​rules published in 2022, they were to be introduced on a voluntary basis starting fiscal year 2027, which begins on April 1.

"The final guidelines are ready. But RBI felt that it is not a priority at this point of time," said one of the sources, declining to be identified as they were not authorised to speak to the media.

"Also these guidelines could be onerous and costly for corporates if implemented as many are not required to disclose climate-related risks on business and supply chains," the source said.

The central bank did not reply to an email seeking comment.

RBI's decision to hold off on issuing final climate disclosure norms for Indian banks has not been previously reported.

The central bank has however proposed a set of guidelines for banks and other regulated entities for the implementation of resolution plans during natural calamities.

REGULATORY MISMATCH

As part of the proposed norms, banks were required to calculate gross emissions of borrowers and disclose this information by asset classes and industries. Separately, lenders were also ??expected to analyse the impact of adverse climate events on borrowers' ability to repay loans.

These moves could have seen an increase in pricing of loans to ‌emission-heavy sectors and borrowers in climate-sensitive zones.

A deferment of these ​rules will likely see banks maintain status quo on credit policies without any adverse impact on climate-sensitive borrowers.

Another challenge, according to a second source, was an emerging mismatch between RBI and India's market regulator Securities and Exchange Board of ??India (SEBI), which has pushed back disclosures related to climate risks of key suppliers.

"RBI wants banks to disclose climate-related risks in portfolios, but ??SEBI guidelines do ‍not require companies to make detailed disclosures on how climate risks affect business and supply chains," the source said.

An alignment is crucial to ensuring banks and companies are on the "same page" regarding climate risk assessments, the source said.

India ranks ‍ninth globally ‌in climate vulnerability, ​according to the Germanwatch Global Climate Risk Index 2026, which tracked extreme weather events ‍between 1995 and 2024.

During this period, India experienced 430 extreme weather events, resulting in over 80,000 deaths and economic losses of ‍around $170 ‍billion, exposing its lenders to ‌credit risks, according to the report.