New Delhi: India’s largest public lender State Bank of India (SBI) has finalised a new environmental, social, and governance (ESG) framework. Till now, the lender was following an ESG policy but there wasn’t any framework for that, which has been completed last month.
Now, any bond issuances or any loan issuances will be under the new ESG framework of the bank. Green car loans will be given under the new policy and customers will get a discount of up to 20 bps. Other than that, the repayment period of the borrower will also be raised from the current seven years to eight years.
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Along with cheaper green car loans, SBI will also offer affordable housing and education loans in the new framework.
Sources told ET NOW that a new product such as the manufacturing of liquid oxygen or oxygen cylinders will be refinanced under SBI’s new framework. As far as the risk model is concerned, the public lender has developed an ESG risk rating model to assess the ESG risk of corporate borrowers under the new framework.
In addition to all this, bond issuances will also take place under the new framework. Green bonds of up to Rs 4,000 crore to Rs 5,000 crore are likely to be issued in the current calendar year. They will be in line with what the Reserve Bank of India has been auctioning for government to the tune of Rs 8,000 crore.
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The RBI report of the Survey on Climate Risk and Sustainable Finance released last year in July said that only a few banks have included climate risk / sustainability / environmental, social and governance (ESG) related Key Performance Indicators (KPIs) in the performance evaluation of their top management.
Only a few banks had a strategy for embedding ESG principles in their business, scaling up their sustainable finance portfolio and incorporating climate change risks into their existing risk management framework, it added.
