Indian Banks not keen to back emission reduction projects

Blame absence of policy framework, regulator on carbon credit market.
“If banks’ exposure to CDM projects is classified as priority sector lending then interest rates on such loans could come down. Further, tax incentives will encourage banks to lend to such projects.”

K. Ram Kumar

Mumbai, Sept. 28 In the absence of a national policy and regulator for carbon credits, banks are reluctant to get involved in financing projects taken up by industrial units to bring down carbon/ greenhouse gas emissions, the Indian Banks’ Association said in its report on carbon credits to the Reserve Bank of India.

With climate change and its adverse implications on economies, health, food production, security, etc., proving to be major challenges world over, the association’s observations about the lack of a policy framework on carbon credits hampering banks’ ability to finance industry’s efforts to embrace green technologies are significant.

According to Mr S. Raman, Executive Director, Union Bank of India, banks will be encouraged to lend to clean development mechanism (CDM or carbon emission reduction) projects if there is a documented national policy on carbon credits and a regulator to oversee the functioning of the carbon credit market.

Alluding to the IBA report, Mr Raman said it is important to set up a formal mechanism for trading in certified emission reduction (CER) units or carbon credits. Further, a nodal agency needs to be appointed for the development of the carbon credit market in India.

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