The Reserve Bank of India (RBI), on November 28, 2025, released the Reserve Bank of India (Small Finance Banks – Climate Finance and Management of Climate Change Risks) Directions, 2025 for public comments. The aims to guide Small Finance Banks (SFBs) in assessing and managing climate-related financial risks while promoting green finance and ensuring protection against greenwashing practices.
The directions mandate SFBs to adopt comprehensive Board-approved policies on Green Deposits and Financing Frameworks, outlining eligible green activities/projects, procedures for evaluation, monitoring, allocation of proceeds, and related disclosures. Green deposits must be denominated in Indian Rupees and follow existing deposit norms. Banks may allocate proceeds towards renewable energy, clean transportation, sustainable water and waste management, pollution control, biodiversity conservation, and other environmentally sustainable activities, while explicitly excluding fossil fuels, nuclear energy, and similar sectors.
Additionally, the framework requires annual third-party verification/assurance of fund utilization and an independent impact assessment of green finance activities. These measures aim to enhance transparency, ensure prudent use of green funds, and strengthen SFBs’ role in advancing India’s sustainable development goals.
These Directions shall come into force with immediate effect.
[Notification No. RBI/DOR/2025-26/203 DOR.SFG.REC.No.122/30.01.021/2025-26]
