Context:
On Earth Day, NABARD announced its Climate Strategy 2030 to tackle India’s demand for sustainable financing through green initiatives.
Key Highlights
- The National Bank for Agriculture and Rural Development (NABARD) emphasized that the India requires approximately $170 billion annually to reach a cumulative total exceeding $2.5 trillion by 2030 to invest in sustainable solutions.
- However, current green financing inflows stand at only $49 billion, with limited private sector participation hindering adaptation and resilience efforts (which received just $5 billion in 2019-20).
- Moreover DLF, a leading real estate developer, has pledged to prioritize sustainable development. They have implemented eco-friendly practices such as zero-discharge water systems and sewage treatment plants, recycling millions of liters of water daily.
- Moreover, they emphasize the need for self-regulation and behavioral changes among workers to tackle environmental challenges in construction.
About NABARD
NABARD came into existence 1982 marked a significant transfer of agricultural credit functions from RBI and refinance functions from the Agricultural Refinance and Development Corporation (ARDC). NABARD is a government-owned institution.
Structure
- NABARD operates under a Board of Directors appointed by the Government of India in accordance with the NABARD Act.
- This board consists of various representatives, including those from rural economics, cooperative banks, and government officials, among others.
- The Managing Director and other directors are appointed by the Central Government in consultation with RBI.
Core Function
- Providing financial assistance to rural areas.
- Developing rural infrastructure.
- Formulating local credit plans and guiding banks to achieve them.
- Supervising Cooperative Banks and Regional Rural Banks (RRBs).
- Offering recommendations to RBI on Cooperative Banks’ licenses and branch expansions etc.
- Designing and executing government development schemes.
- Training and supporting handicraft artisans for enhanced marketing.
- Spearheading watershed development for sustainable climate resilience.
Prominent Programs
- SHG Bank Linkage Project (1992)
- Kisan Credit Card Scheme
- Tribal Development Program
- EShakti Project: Launching digitization for Self-Help Groups (SHGs) in 2015.
- RuPayKisan Cards (RKCs)
NABARD’s Climate Strategy 2030 focuses on four key pillars:
- Accelerating Green Lending Across Sectors: This pillar outlines strategies to increase lending for renewable energy projects, climate-smart agriculture, and other green initiatives.
- Playing a Broader Market-Making Role: NABARD aims to develop a more robust market for green financing by facilitating investments and partnerships between different stakeholders.
- Internal Green Transformation: The strategy emphasizes NABARD’s commitment to adopting more sustainable practices within its own operations.
- Strategic Resource Mobilization: This pillar focuses on mobilizing additional resources, both domestic and international, to support green financing initiatives.
Challenges:
- Attracting Investors: Convincing private companies to invest in green projects can be tough due to perceived risks. India needs ~$170 billion annually, but only attracts ~$49 billion currently.
- Tracking Impact: NABARD needs a strong system to check if green loans benefit the environment. Studies show good monitoring improves project impact.
- Building Expertise: NABARD’s experience lies in rural development projects. Green financing requires specialized skills.
- Policy Environment: Favorable government policies like tax breaks for green businesses can boost green investments.
Way forward:
- Risk Sharing: Partnering with others can spread risk and make green projects more attractive.
- Strong Monitoring: Effective tracking allows NABARD to assess project success and replicate effective strategies.
- Staff Training: Developing staff skills in green project management is crucial.
- Collaboration: Working with government, banks, and NGOs strengthens resource mobilization and expertise.
Conclusion:
NABARD’s Climate Strategy 2030 represents a significant step towards bridging the green financing gap in India. By mobilizing resources and fostering innovation, this strategy has the potential to accelerate India’s transition towards a more sustainable future.