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RBI to Mandate Climate Risk Disclosures for Banks and NBFCs, Signals Shift Toward Sustainable Finance

Updated: July 18, 2025 12:54

Image Source: Esya Centre
India’s central bank, the Reserve Bank of India (RBI), is set to roll out mandatory climate risk disclosure norms for banks and financial institutions in the coming months. The move follows the release of a draft framework in February 2024 and aims to align India’s financial sector with global sustainability standards such as TCFD and IFRS S2.
 
Key Highlights:
  • Scheduled commercial banks, All-India Financial Institutions, Tier-IV urban cooperative banks, and top-layer NBFCs will be required to disclose climate-related financial risks.
  • Disclosures will cover four thematic pillars: governance, strategy, risk management, and metrics & targets.
  • Implementation will begin in FY26 for governance, strategy, and risk management, while metrics and targets disclosures will start in FY28.
Strategic Context:
  • The RBI’s framework seeks to address physical and transition risks from climate change, including floods, heatwaves, and policy shifts toward low-carbon economies.
  • Entities must report on financed emissions, scenario analyses, and climate resilience strategies across short-, medium-, and long-term horizons.
  • The guidelines aim to prevent mispricing of assets and misallocation of capital due to inadequate climate risk information.
Market Outlook:
  • The disclosures are expected to improve transparency, investor confidence, and capital allocation toward green finance.
  • Smaller institutions may face implementation challenges due to data limitations and resource constraints, but staggered timelines offer relief.
  • The RBI’s initiative complements SEBI’s ESG mandates and supports India’s net-zero 2070 goal.
Sources: PwC India, Responsible Investor, Times of India, RBI Draft Guidelines, Straits Times (July 2025)

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