Reserve Bank of India (Commercial Banks - Climate Finance and Management of Climate Change Risks) Directions, 2025 · RBI/DOR/2025-26/172
RBI master-direction RBI/DOR/2025-26/172 · 28 Nov 2025
RBI master-direction RBI/DOR/2025-26/172 · 28 Nov 2025
Summary
Check the official recordThe Reserve Bank of India establishes a framework for commercial banks to manage climate change risks and accept green deposits. Banks that choose to raise green deposits must implement Board-approved policies and a Financing Framework. These banks must allocate proceeds exclusively to eligible green activities, such as renewable energy, energy efficiency, and sustainable water management. Banks must perform annual third-party verification of fund allocation and conduct an annual impact assessment. These reports must be available on the bank website. Banks must also submit a review report to their Board of Directors within three months of the financial year end. These directions apply to all commercial banks, excluding Small Finance Banks, Payment Banks, and Local Area Banks.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
If you do not comply
RBI/DOR/2025-26/172 DOR.SFG.REC.No.91/30.01.021/2025-26
November 28, 2025
Reserve Bank of India (Commercial Banks - Climate Finance and Management of Climate Change Risks) Directions, 2025
Table of Contents
Chapter I – Preliminary A. Short Title and Commencement B. Applicability C. Definitions
Chapter II – Role of the Board
Chapter III – Framework for Acceptance of Green Deposits A. Policy B. Denomination, interest rates and tenor of deposits C. Financing Framework D. Use of Proceeds E. Third-Party Verification / Assurance F. Impact Assessment G. Reporting and Disclosures
Chapter IV – Repeal and other provisions A. Repeal and saving B. Application of other laws not barred C. Interpretations
Introduction
The Master Direction (MD) provides applicable guidelines as well as guidance related to climate finance and management of climate change risks. The objective is to enable commercial banks to carry out comprehensive assessment of climate change risks, integrate climate change risk considerations into their extant risk management frameworks and structures and optimise flow of credit to green activities / projects overcoming greenwashing challenges, protecting interest of the depositors, and thereby aiding customers to achieve their sustainability agenda.
In exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act, 1949, and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, the RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Directions hereinafter specified.
Chapter I – Preliminary
A. Short Title and Commencement
These Directions shall be called the Reserve Bank of India (Commercial Banks - Climate Finance and Management of Climate Change Risks) Directions, 2025.
These Directions shall come into force with immediate effect.
B. Applicability
C. Definitions
‘green activities / projects’ means activities / projects meeting the requirements prescribed in paragraph 14 of these Directions;
‘green deposit’ means an interest-bearing deposit, received by a bank for a fixed period and the proceeds of which are earmarked for allocation towards green finance;
‘green finance’ means lending to and / or investing in green activities / projects meeting the requirements prescribed in paragraph 14 of these Directions. Such lending contributes to climate risk mitigation, climate adaptation and resilience, and other climate-related or environmental objectives - including biodiversity management and nature-based solution;
‘greenwashing’ means the practice of marketing products / services as green, when in fact they do not meet requirements to be defined as green activities / projects.
Chapter II – Role of the Board
A bank desirous of raising green deposits shall put in place comprehensive Board-approved policies on Green Deposits and Financing Framework, the coverage of which are indicated in paragraph 8 and paragraph 11 respectively of these Directions.
The Board shall be responsible for reviewing the bank’s green deposit initiatives through a review report to be placed in accordance with the provisions specified in paragraph 19 of these Directions.
Chapter III – Framework for Acceptance of Green Deposits
A. Policy
B. Denomination, interest rates and tenor of deposits
Explanation:
It is not mandatory for a bank to raise green deposits, but in case it intends to raise green deposits from their customers they should follow the framework prescribed herein.
The extant guidelines enumerated above do not permit a bank to offer differential rate of interest on green deposits.
A bank shall pay interest on green deposits to its customers as per agreed terms and conditions and aforesaid directions irrespective of allocation / utilisation of proceeds.
With respect to premature withdrawal of green deposits, while there is no restriction, a bank shall adhere to the aforesaid directions. Further, premature withdrawal shall not have any bearing on the activities / projects undertaken using the proceeds of green deposits.
The deposits raised under the framework are covered by Deposit Insurance and Credit Guarantee Corporation (DICGC) in accordance with the Deposit Insurance and Credit Guarantee Corporation Act, 1961 and the regulations framed thereunder, as amended from time to time.
C. Financing Framework
Explanation:
The green activities / projects financed under the framework can be classified under priority sector if they meet the requirements laid down in Priority Sector Lending (PSL) guidelines of RBI [Master Directions - Reserve Bank of India (Priority Sector Lending – Targets and Classification) Directions, 2025 dated March 24, 2025], as amended from time to time.
Investment by a bank in Sovereign Green Bonds (SGrBs) are covered under the framework.