he Reserve Bank of India (RBI) plans to set up a edicated 'on Tap' cohort on climate change risks and sustainable finance under its regulatory sandbox initiative, Governor Sanjay Malhotra said on Thursday.
Mumbai:The Reserve Bank of India (RBI) plans to set up a edicated 'on Tap' cohort on climate change risks and sustainable finance under its
regulatory sandbox initiative, Governor Sanjay Malhotra said on Thursday.
"We propose to set up a dedicated 'on Tap' cohort on climate change risks and sustainable finance under RBI's Regulatory Sandbox
initiative. We are also planning to conduct a special 'Greenathon' on climate change and related aspects," Malhotra said in his keynote
address at the Policy Seminar on Climate Change Risks and Finance organised by the RBI.
A Regulatory Sandbox (RS) refers to live testing of new products or services in a controlled regulatory environment and enables the regulator, financial service providers and customers to conduct field tests to collect evidence on the benefits and risks of new financial innovations while monitoring and containing their risks.
Malhotra also asked lenders to create a common pool of bankable green/sustainable projects so that the entire ecosystem can benefit.
This will help them overcome capacity and expertise constraints, which limit lenders ability to appraise and thus finance climate change mitigation.
“One of the oft-cited constraints to adequate flow of climate related finance has been the lack of bankable projects. Capacity and expertise
constraints limit the ability to appraise and thus finance climate change mitigation. It also enhances the risk of funding such projects.
Thus, creation of a common pool of such bankable projects will have multi-fold benefits for the entire ecosystem,” the central bank chief
said.
The Governor underscored that Regulated Entities (REs or lenders) with experience of such projects can contribute to the pool for the benefit
of others, while also benefiting from such information shared by other REs.
“This will help share knowledge for benefit of all. There is a need for collaboration in this emerging and evolving area. I urge the REs
to seriously consider setting up such a pool through an appropriate institutional arrangement,” he said.
Malhotra emphasised that lenders need to develop suitable capacity and technical know-how to better appraise risks in financing projects
which use green technologies.
