Whether Banks are Ready for Transition – Indian Scenario

Climate risk management including transition risk has been evolving as a critical area requiring ambitious actions to be implemented. India being an emerging economy has dependency on fossil fuels which will continue in short run. Reserve Bank of India as a regulator has been working actively in the area after the Global Financial Crisis (GFC) and has recently come forth with the draft of standard disclosure framework for climate related financial risks, to provide guidance to all the regulated entities. The present study aims to evaluate theoretically the preparedness of Indian banks towards transition. In the absence of the relevant data, methodological interventions do not seem plausible. However, the study explores the factual investigations as per the latest available reports in this area. It is found that the major scheduled commercial banks have initiated few important and obvious steps towards climate related risk management and disclosures. Case studies suggest that few major banks have moved early towards integration of the sustainability policies in their risk management system and others are still in the process of doing it. Hence, it may be concluded that Indian banks are unceasingly walking towards transition. The future course of action in this area may the statistical/empirical investigation of the readiness of Indian banks once the proper database is available in public domain.