Inadequate supervision leaves Indian banks burdened with coal financing
The Reserve Bank of India (RBI) has announced a series of measures aimed at reducing the exposure of banks to high-carbon sectors, particularly coal, and encouraging the financing of cleaner energy sources.
One of the key changes includes requiring banks to disclose their exposure to high-carbon sectors with more specific classification than current Basel's Pillar 3 requirements. The RBI can also set portfolio-level exposure limits for coal-related lending, similar to other risk-prone sectors.
The RBI is also exploring incentives for banks that adopt coal exclusion policies or direct finance towards green infrastructure. This could include favourable treatment in supervisory assessments or access to lower cost funding.
In addition, the RBI is encouraging financial institutions to develop inclusive transition strategies that support worker retraining, community resilience, and regional development in coal-dependent areas. This is to ensure a just transition that maintains public confidence and protects the financial system from long-term shocks.
The RBI's climate risk information system is also set to be scaled rapidly to support transition risk analysis. This includes the incorporation of transition risk analysis into supervisory assessments, including climate stress testing and scenario analysis.
As of October 2023, there are no specific details about Indian banks that have concrete transition plans in place to reduce their exposure to the coal industry and promote the financing of cleaner energy sources by November 2025. However, there is growing movement towards sustainable finance and climate-related commitments in the Indian banking sector.
Some Indian banks and financial institutions have previously shown commitment to sustainable practices and steps towards reducing their environmental impact. For instance:
- State Bank of India (SBI): SBI has announced plans to increase financing for renewable energy and reduce coal financing in the past.
- ICICI Bank: ICICI has pledged support for the Paris Climate Agreement and developed plans to reduce the carbon footprint of its portfolios.
- HDFC Bank: HDFC Bank has also initiated efforts towards promoting renewable energy and reducing carbon emissions.
For current information and specific plans by November 2025, it is advisable to consult the official press releases and annual reports of the respective banks or to contact the banks directly.
This page was last updated on July 31, 2025.
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