The Reserve Bank of India {RBI) has called
for financial institutions, including banks and
large non-bank financiers to disclose climate
change risks. RBI believes the move will help
customers, depositors, investors, and
regulators understand the risks better.
RBI wants banks, NBFCs to make climate risk disclosures
RBI said climate change is one of the most significant risks confronting lenders today
MUMBAI
he Reserve Bank of India (RBI) on
Wednesday suggested that financial
institutions, including banks and large
non-bank financiers, should disclose cli-
mate change risks. The central bank
believes the move will help customers, depositors,
investors ,andregulators understand the risks bet-
ter. Emphasizing the growing importance of cli-
mate-related financial risks, RBI said there was a
need for regulated entities to provide structured
information about the risks. Such disclosures
should be integrated into the lender's financial
results or statements on its website, it added.
To be sure, while existing norms mandate len-
derstodisclose material risks as part of their Pillar
3 disclosures, RBI suggested that the disclosures
should comprise governance, strategy, risk management, and targets across four thematic areas.
RBI said climate change isone of the most signif-
icantrisks confronting lenders today, and the pro-
posalsare part of the draft disclosure framework on
climate-related financial risks. The proposed
normswill apply to scheduled commercial banks,
excludinglocal area
banks, payments
banks, and regional
rural banks.
It would also
apply to tier-IV pri-
mary urban co-op-
erative banks, and
all-India financial
institutionssuch as Exim Bank, Nabard, and Sidbi,
aswell astopand upperlayernon-banking finan-
cial companies (NBFCs). According to RBI 'sscale-
based regulations, NBFC sare categorized into four
layers based on their size, activity, and perceived
risks: base, middle, upper, and top layers. Fifteen
The proposed norms will apply
to scheduled commercial banks,
excluding local area banks, payments
banks, and regional rural banks
NBFCs, including Tata Sons, Shriram Finance, and
LIC Housing Finance, belong to the upper layer.
The new guidelines will roll outin phases. Gov-
ernance, strategy, and riskmanagement for banks,
all-India financial institutions, and both types of
NBFC swill start from FY26. Disclosure on metrics
and targets will
become effective
from FY28. Urban
cooperative banks
will adopt these
norms a year after
bank sand NBFCs.
“Regulated enti-
ties (REs) should dis-
close information about their climate-related
financial risks and opportunities for the users of
financial statements,” it said, adding that such dis-
closures will foster an early assessment of climate-
related financial risks and opportunities, besides
facilitating market discipline
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