The Reserve Bank of India(RBI) has asked all the banks to monitor the industries that are at risk of green transition as nations across the globe move towards decarbonisation goals. As per the report of RBI, while lenders have relatively less exposure to industries that have direct links to fossil fuels, however, there are chances of some hidden risks in form of companies that have indirect exposure.
The report ‘Green Transition risks to India Banks’ has been published in the monthly bulletin of the Reserve Bank of India. The report states that a transition to green energy and a move towards input mix could put a burden on costs to these sectors in the short term. The margin will be trimmed if the increase in cost is not passed on to the users, leading to rising in gross non-performing assets in the sector.
The report has been released in the wake of the 2021 global climate change summit where countries across the world agreed to tackle climate change through carbon reduction.
