Swaminathan J: Fostering economic growth through sustainable finance and financial inclusion

Speech by Mr Swaminathan J, Deputy Governor of the Reserve Bank of India, at the Conference on Priority Sector Lending, held at the College of Agricultural Banking (CAB), Pune, 12 October 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Shri V G Sekar, Principal, College of Agricultural Banking, Heads of Priority Sector verticals of banks, Members of faculty from CAB, Ladies and Gentlemen. Good morning.

I thank CAB for inviting me today to discuss a critical topic that lies at the crossroads of financial institutions' responsibilities and our collective vision for a better, more sustainable world. I propose to briefly discuss the aspect of sustainable finance to begin with before coming to the theme of the conclave, that is Priority Sector Lending, as I believe that there is a strong interplay between these two.

Sustainable finance, often referred to as responsible or green finance, is a concept that has gained immense traction in recent years. Simply put, it is funding to businesses and projects that promote not only economic growth but also environmental protection, social equity, and responsible governance.

The importance of sustainable finance cannot be overstated. We are living in an era where climate change, social inequalities, and governance issues pose significant threats to the stability of economies and societies.

For instance, in India itself we can see some of these risks materialising. Due to its geographic, environmental and economic characteristics India is particularly vulnerable to climate change. As per online sources, upto June 30, 2023 alone India experienced extreme weather events on 143 out of 181 days. Variability in monsoon patterns coupled with temperature changes impact crop production and affect food security. Apart from agriculture, even in other sectors, the economic impact of climate change in India could be substantial. These risks can no longer be overlooked. From a financial services industry perspective, sustainable finance is a powerful tool to mitigate these risks, drive positive change, and ensure long-term prosperity.

Even across the globe, we are witnessing a remarkable shift towards sustainable finance. Governments, regulatory bodies, and international organizations are actively engaged in setting standards, guidelines, and incentives to encourage sustainable finance practices. Initiatives like the United Nations Principles for Responsible Banking and the Task Force on Climate-related Financial Disclosures (TCFD) are driving change at the global level.