RB-CRIS will consist of a web-based directory, listing various data sources, and a portal comprising of processed data in standardised formats
Reserve Bank of India (RBI) governor Shaktikanta Das proposed the formation of the Reserve Bank-Climate Risk Information System, after the monetary policy committee (MPC) meeting held on 9th October, today. It will serve as a depository for data relating to local climate scenarios, climate forecasts and emissions to help regulated entities (RE) undertake climate risk assessment.
Das said, “Climate change is emerging as a significant risk to the financial system world over. This makes it necessary for regulated entities to undertake robust climate risk assessment, which is sometimes hindered by gaps in high quality climate related data.”
Undertaking climate risk assessment is crucial for REs to ensure stability of their balance sheets and that of the financial system, he said in a statement.
RB-CRIS, divided into two parts, will consist of a web-based directory, listing various data sources, (meteorological, geospatial, etc.) and a portal comprising of processed data in standardised formats. While the directory will be available on the RBI website, the data portal will be made available only to the REs in a phased manner.
Delivering a lecture last month, Das said the biggest threats to central banking in future will be from climate risks and the over-permeation of technology in the financial services space.
Climate change can impact central bank’s core mandates of price and financial stability by causing sudden price pressures, damaging infrastructure, loss of economic activity and stress on fiscal balances, he said.
The supply shocks caused by severe weather conditions can fuel inflationary pressures and slowdown global growth and trade.
M Rajeshwar Rao RBI’s deputy governor, in July, also talked about the risks, saying that climate change could reduce the ability of Indian borrowers to repay their loans amidst a credit boom in the country’s fast-growing economy, creating risks for the overall financial sector.
He also mentioned the importance of putting in place the right climate information architecture in creating a conducive environment to attract private capital for climate finance.
RBI released a Discussion Paper on Climate Risk and Sustainable Finance in July 2022 which elaborated on the climate-related financial risks and emphasised the need for a comprehensive framework to identify, assess and mitigate the same.
“Keeping in view our national commitments and priorities, the Reserve Bank intends to prepare a strategy based on global best practices on mitigating the adverse impacts of climate change, learnings from participation in standard-setting bodies and other international fora,” the paper mentioned.
In February this year, the central bank also released the Draft Disclosure Framework on Climate-related Risks, proposing standardised disclosure guidelines for REs to better manage climate-related financial risks. It said all financial institutions will have to disclose their governance, strategy and risk management processes from FY26 and specify metrics and targets from FY28 onwards.
In June, the RBI came up with aspirational goals for RBI@100 which included a section on dealing with climate change. The goals included establishing regulatory framework for addressing climate change related challenges. RBI aims to finalise guidance for REs to stress test their asset portfolio to assess impact of climate change.
The goals also include strengthening payment systems’ resilience to climate risks, developing climate risk disclosure norms for REs, providing inputs to government for finalising taxonomy on climate risks and publishing a risk management framework for managing them.
Although RBI has begun addressing the challenges relating to climate change, it has been slow to proceed in the direction. There is a need for RBI to increase its pace to save the country's financial sector from climate change.