NEW DELHI: Even as India aggressively pushes for a clean energy transition, Indian banks have substantially financed fossil fuel and coal-fired power projects—totalling approximately USD 29 billion between 2016 and 2023—which could hinder and complicate the path to achieving net-zero emissions, states a recent report.
Prepared by Climate Risk Horizon, a Bangalore-based non-profit organisation that monitors climate-related risks for investors, the report highlights that the State Bank of India (SBI) and private lenders such as Axis Bank and ICICI Bank were among the top financiers of coal.
Titled “Stuck in the Past: Coal Ties Hinder Indian Banks’ Energy Transition” the report indicates that India’s leading banks invested around USD 29 billion in coal during the specified period. Of this amount, approximately USD 15.2 billion was provided as coal loans, while USD 13.5 billion was allocated to coal underwriting services
Further segregating the data, the analysis shows that public banks provided roughly 75% of the coal loans while private banks financed roughly 83% of the total underwriting.
According to the report, over these eight years, the amount of coal loans fluctuated significantly. Still, coal underwriting by Indian banks remained relatively stable with an average of USD 1.7 billion per year.
Underwriting service is a process of mitigating risk for financial transactions by financial institutions by guaranteeing repayment in case of damage or financial loss.
Data shows that underwriting has become the dominant channel for financing coal globally.
“In India, higher indirect coal financing by private banks indicates a continued desire to profit from the climate-changing fuel, albeit with a lower risk exposure given the coal sector’s historical volatility,” said Anusha Das, co-author of the report.
The report analysed that over 200 Financial Institutions worldwide—including more than 80 banks—have adopted coal exclusion policies to align with decarbonisation and Net Zero goals. In India, Federal Bank, RBL Bank, and Suryoday Small Finance Bank have set an example by adopting coal exclusion policies.
However, most banks have 25-35% of their loan books tied to coal, which raises serious concerns about their commitment to transitioning to clean energy and threatens investment.
For instance, declining price of renewable energy compare to coal energy and stricter environmental scrutiny further stressed the debt of coal-power sector.
According to the report, between 2016 and 2020, major Indian and foreign investors such as HDFC Mutual Funds and ICICI Prudential lost an estimated USD 3 billion in foregone earnings because of the underperformance of coal sector stocks.
The data related to lending to coal-related projects was collected from open sources and Urgewald, a German non-profit advocating environmental and human rights organisation.