- Report urges Reserve Bank of India (RBI) to adapt Basel climate risk guidelines to India’s unique financial landscape.
- Emphasis on integrating both macroprudential and microprudential frameworks to safeguard financial stability.
- Climate-related shocks could trigger systemic vulnerabilities if not addressed with tailored transition planning.
The Reserve Bank of India (RBI) has been advised to strengthen its climate risk framework by balancing global best practices with domestic realities, according to a new report by the India Initiative on Climate Risk and Sustainable Finance (IICRSF). Produced in collaboration with the Climate Bonds Initiative, ODI Global, and auctusESG, the report lays out a blueprint for embedding climate resilience across India’s financial system.
The analysis builds on the Basel Committee on Banking Supervision’s (BCBS) 2022 principles, which outline 18 guidelines for banks to integrate climate risk into governance, strategy, and risk management. While largely microprudential in focus—directed at the resilience of individual banks—the report stresses that India cannot ignore macroprudential oversight.
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“From a systemic perspective, climate shocks could amplify vulnerabilities in India’s financial system,” the report warns, urging regulators to design transition guidance and capital frameworks tailored to local conditions.
The report’s core recommendation is a dual approach: weaving together the Basel principles with national macroprudential tools to reduce systemic risk, mobilize climate finance, and fortify India’s pathway to a sustainable, climate-resilient economy.
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