Context: The National Bank for Agriculture and Rural Development (NABARD) revealed its ‘Climate Strategy 2030’ document on World Earth Day (22nd April), aiming to address India’s need for enhanced green financing.

Green Financing Scenario in India

• Despite India’s requirement of $170 billion annually for achieving sustainable development goals by 2030, the current green finance inflows remain critically insufficient.

• As of 2019-20, India secured only about $49 billion in green financing, with a significant portion allocated to mitigation efforts, leaving minimal funds for adaptation and resilience.

Need to focus on Green Financing

• Green finance, which aligns financial investments with sustainable and eco-friendly projects, has emerged as a pivotal force in fostering the advancement of renewable energy in India.

• India’s commitment to renewable energy, aiming to achieve 500 GW of renewable energy capacity by 2030, requires green funding.

• While facilitating the expansion of renewable energy infrastructure, green finance contributes to a reduction in the carbon footprint.

Challenges in the sector

• Insufficient green finance: India requires approximately USD 170 billion annually to reach a cumulative total of over USD 2.5 trillion by 2030, current green finance inflows are critically insufficient.

• As of 2019-20, India garnered about USD 49 billion in green financing.

• Minimal private sector engagement: With the majority of funds earmarked for mitigation, only USD 5 billion was allocated towards adaptation and resilience.

• Viability issues: Private sector is showing less interest in these areas due to challenges in bankability and commercial viability.

• Other hurdles: Issues such as project risks, policy uncertainties, and the need for standardized green finance metrics pose hurdles for the sector.

NABARD’s Climate Strategy 2030

• NABARD’s Climate Strategy 2030 is a comprehensive blueprint designed to tackle India’s growing demand for green financing.

• It is structured around four key pillars.

1. Accelerating green lending across sectors

2. Playing a broader market-making role

3. Internal green transformation of NABARD

4. Strategic resource mobilisation

What is the role of NABARD?

• The National Bank for Agriculture and Rural Development (NABARD) is the premier organisation dealing with policy, planning and operations in the field of credit for agriculture and other activities in rural areas.

• NABARD was established in 1982 by transferring the agricultural credit functions of RBI and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC).

• It was set up under an Act of Parliament for supporting and promoting agriculture and rural development. 

• NABARD has been playing a crucial role in the development of various activities in the farm and non-farm sector in the country. 

• In its journey of more than four decades, the premier development financial institution has transformed lives in Indian villages through agri-finance, infrastructure development, banking technology, promotion of microfinance and rural entrepreneurship.

• Headquartered in Mumbai, NABARD has a very strong regional presence with 31 offices, 355 district offices and 29 cluster offices across the country. 

Functions of NABARD

• Financial, Developmental and Supervision are three broad heads which enable NABARD to touch almost every aspect of rural economy. 

• It includes:

• i) Providing refinance support.

• ii) Building rural infrastructure.

• iii) Preparing district level credit plans.

• iv) Guiding and motivating the banking industry in achieving credit targets.

• v) Supervising Cooperative Banks and Regional Rural Banks (RRBs) and helping them develop sound banking practices. 

• vi) Designing new projects for rural development.

• vii) Implementing Centre’s development schemes.

• viii) Training handicraft artisans and providing them a marketing platform for selling their articles among others.

This strategic initiative not only reinforces NABARD’s commitment to environmental stewardship but also positions it as a pivotal player in India’s transition towards a resilient and sustainable economy.