• Notification Date: 21-02-2025
• Notification No: N/A

Green Loans Enhance Financial Stability, Says IIM Lucknow Study

Banks with a higher proportion of green loans are more financially stable in the long run, new Indian Institute of Management (IIM) Lucknow study has found. The study published in Finance Research Letters identifies banks engaging in non-carbon-intensive lending as increasing loan books and lowering default risks.

The report stresses the importance of green loans—borrowing initiatives with a focus on environmental purposes—and indicates that Indian banks have the potential to become major contributors to guiding India to a low-carbon economy. Despite all global initiatives, the report reveals gaps in green loan guidelines, particularly in India, where most banks continue to focus mainly on carbon-emitting sectors.

IIM Lucknow scholars developed a framework to spot non-carbon-intensive sectors, offering banks with valuable information for the optimization of credit portfolios. The study also urges policymakers to implement regulatory incentives to motivate banks' adoption of green lending practices and sustainable growth.

"A greener, optimized credit portfolio of banks will not just stabilize the financial system but will also be consistent with the global sustainability goals," said Prof. Vikas Srivastava, the study leader. The study opens up the way for Indian banks to balance financial power and environmental protection so that the future gets empowered.