Net-zero shift may have less impact on banking, says RBI study

India made five pledges at the global climate meeting in Glasgow in October 2021 for taking steps towards controlling emissions.

The transition to the net-zero emission target will entail limited spill-over impact on Indian banking because three sectors with direct exposure to fossil fuels — electricity, auto, and chemical — form only 10 per cent of non-retail credit, according to a study by the Reserve Bank of India (RBI).
 

But several other industries indirectly use fossil fuels and therefore, any transition to green energy can have implications for their income and consequently their interest coverage ratio (ICR). Therefore, the gross non-performing assets (GNPA) ratio of such industries may be sensitive to green energy transition and thus, the impact on the