Green banking has moved from being a buzzword to a boardroom imperative. As India eyes net-zero by 2070, its banking sector is undergoing a quiet yet strategic transformation. What was once confined to CSR reports is now steering balance sheets. From lending frameworks to product design, sustainability is becoming central to how banks define long-term value.
Planting the Seeds to the Green Transition
The ecosystem around green banking is evolving rapidly, propelled by a confluence of forces:
- Regulators Are Raising the Bar
From stress testing to disclosure norms; Indian financial authorities are signalling that ESG compliance is no longer optional.
- SEBI Sets the Tone
With ESG reporting now mandatory for top listed companies, SEBI is nudging the broader sector toward sustainability benchmarks.
- Investors’ appetite for sustainability
India saw a record $14.9 billion in renewable energy investments in 2023, with a significant share financed via green bonds and sustainable credit instruments. Together, these forces are turning eco-friendly banking practices from optional to essential.
Actions Speaking Louder for Indian Banks
Intent is no longer enough. Indian banks are now taking tangible steps that go beyond checkbox ESG.
- Issuing Green Bonds at Scale: SBI raised $1 billion through green bonds in 2023, aiming to finance renewable energy and clean mobility projects. HDFC Bank, too, raised $500 million for similar initiatives.
- Promoting Sustainable Products: ICICI Bank launched ‘Green Fixed Deposits’, where funds are earmarked for green initiatives. It’s a signal that banks are now creating offerings for retail investors seeking climate-aligned options.
These shifts aren’t one-off pilots. They are scalable steps that will change the banking landscape in the nation.
Challenges Along the Way
Despite the momentum, the journey to sustainable banking in India isn’t without friction.
Many banks face data gaps, struggling to map carbon intensity across loan books with a lack of standardised ESG metrics. Evolving regulations bring compliance risks, while a shortage of professionals with ESG expertise adds to the challenges. Still, the roadblocks are not deal-breakers. They are opportunities for those willing to lead the way.
Future of Finance Is Greener than we Think
Green banking has now become a smart business. With ESG now embedded in regulations and rising customer and investor expectations, banks that partner with the right tech players will shape the green finance market. Sustainability is becoming a key competitive edge for Indian banks. Clayfin’s digital banking solutions help reduce paper and branch dependency, supporting carbon footprint reduction while enhancing customer experiences.
