Highlighting the importance of sustainable finance in the face of climate change risks, Reserve Bank Governor Shaktikanta Das has raised concerns about several challenges facing green bonds and green deposits. These challenges include issues with scalability, greenwashing, and inadequate monitoring and reporting mechanisms, among others.
The central bank introduced the frameworks for sovereign green bonds in 2022 and green deposits in 2023. But they have not gained traction and volume. So far only SBI has launched green deposit schemes but they lack traction, while many have launched green bonds, he said.
“Despite the many benefits, green bond and green deposit frameworks face several challenges. They include scalability, as the market for green bonds needs to expand significantly to attract larger issuances and diverse set of investors,” Das told while delivering his keynote address at the fifth edition of the Global Fintech Summit in Mumbai on Wednesday.
“Ensuring authenticity and the impact of green projects, financed through these frameworks, requires robust monitoring and reporting mechanisms. Technology can play a pivotal role in overcoming these challenges,” Das further said, adding long-term economic stability needs prioritisation of sustainable growth and environmental preservation.
“Our commitment to environmental preservation is enshrined in Article 48-A8 of the Constitution. From a financial sector perspective, the RBI taken steps for ensuring sustainability with recent initiatives like the frameworks for sovereign green bonds in 2022 and the green deposits in 2023.
“These frameworks are expected to play an important role in financing green projects, incentivising sustainable practices and lowering societal costs of development,” Das added.
Stating that new fintech can play a pivotal role in overcoming these challenges, he said for instance blockchain can enhance transparency and traceability in green bond issuances and provide immutable records of project impacts, while artificial intelligence and big data analytics can enable banks and investors to assess environmental risks and opportunities associated with green investments.
Also, fintech innovations such as digital platforms for trading green bonds and impact measurement tools can streamline processes and attract a broader investor base.
Over the next two decades, fintechs will be instrumental in driving the progress in transition finance, climate finance and nature-based solutions, he said.
Speaking on the measures that the RBI has been making the UPI and Rupay Cards global payment tech platform, Das said today the UPI QR code is acceptance across Bhutan, France, Mauritius, Singapore, Sri Lanka, Nepal, and the UAE. Similarly, RuPay Cards are accepted in Nepal, Bhutan, Singapore, Mauritius, and the UAE.
Similarly, the UPI is integrated in Singapore for peer-to-peer remittances and agreements have been signed with regulators in the UAE, Nepal, Namibia, and Peru for deploying UPI-like solutions, signify the progress made so far in obtaining global financial connectivity.
On taking the central bank digital currency, which are available in the domestic market both in retail and wholesale since the past two year, Das said, “we’d be happy to co-operate with other nations in their CBDC efforts” but didn’t offer details.