The government of India is planning to establish the National Green Financing Institution.
The institution will help to fast-track the country’s green transition and bridge the financing gap in the renewable
energy sector.
The Niti Aayog is studying potential structures for the National Green Financing Institution. It is examining the models of the National Bank for Agriculture and Rural Development and the National Bank for Financing Infrastructure and Development for the same.
In addition to a dedicated bank, Niti Aayog is analyzing best practices from green banks worldwide. It is also looking into repurposing already-existing organizations like IREDA, the Climate Fund in GIFT City, Green InvIT, etc., the government think tank said in its annual report for FY2024-25.
“The primary purpose of the institution will be to aggregate green capital from different sources and lower the cost of capital,” it said.
According to market reports, India’s financial flows are significantly below the required amount to meet its net-zero target by 2070, requiring $1.4 trillion in investment support, a significant challenge due to limited international finance and primarily domestic climate action funding.
The Climate Policy Initiative’s 2022 report also states that India’s majority of green finance comes from domestic sources, with 87% and 83% from the 2019 and 2020 fiscal years, respectively. The Reserve Bank of India mandates 2.5% of India’s GDP for green finance to meet its net-zero goal.
It must be noted that Niti Aayog is creating a decarbonization roadmap for cement, aluminum, and MSME sectors, identifying emission sources, assessing competitiveness, and evaluating infrastructure and technologies’ readiness for decarbonization.
