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RBI Directions on Climate Finance for NBFCs

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Issued by RBI: 28 Nov 2025

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📄 Source: Reserve Bank of India · RBI/DOR/2025-26/364

Quick answerRBI issues directions for NBFCs to manage climate change risks and promote green finance, including guidelines for green deposits and financing frameworks.

What changed

RBI has issued directions for Non-Banking Financial Companies (NBFCs) to manage climate change risks and promote green finance. The directions cover guidelines for green deposits, financing frameworks, and reporting requirements.

What it means for you

These directions aim to help NBFCs assess climate risks, embed climate considerations into their risk frameworks, and channel credit to green projects, thereby protecting depositors and supporting customers' sustainability goals.

The rule, in the simplest words

NBFCs must have a board‑approved policy (a plan signed off by the top managers) that explains how they will take green deposits and give green loans.
Money from green deposits must only go to projects that are truly green and cannot be used for fossil‑fuel extraction, nuclear power, waste incineration, alcohol, weapons, tobacco, gaming, palm‑oil, biomass from protected areas, landfill, or hydropower plants bigger than 25 MW.
NBFCs must add climate‑risk checks into their normal risk‑management system so they can see how climate change could affect their loans.
Each reporting period NBFCs must tell depositors and regulators how much green finance they did and which projects got the money.

How it plays out — a real example

Rohit, a green‑deposit officer at a deposit‑taking NBFC in Mumbai, reviews the day's green‑deposit inflows, matches the funds to approved solar‑panel and energy‑efficiency projects (making sure none are in the excluded list), and then prepares a short, friendly update for depositors showing how their money is helping clean‑energy projects.

What you must do

NBFCs must put in place comprehensive Board-approved policies on Green Deposits and Financing Framework
NBFCs must ensure that green deposits are earmarked for allocation towards green finance
NBFCs must report on their green finance activities and disclose relevant information to depositors

Who it affects

Non-Banking Financial Companies (NBFCs), Deposit-taking NBFCs (NBFC-D), Deposit-taking Housing Finance Companies

What are green activities/projects?

Green activities/projects are those that meet the requirements prescribed in paragraph 13 of these Directions.

What is greenwashing?

Greenwashing is the practice of marketing products/services as green when in fact they do not meet requirements to be defined as green activities/projects.

What is the objective of these directions?

The objective is to enable NBFCs to comprehensively assess climate change risks, integrate climate risk considerations into their risk management frameworks, and optimize the flow of credit to green activities/projects.

📜 Read the original circular — full text as issued by RBI

Exclusions 
 • Projects involving new or existing extraction, production, and distribution of fossil fuels, including improvements and upgrades; or where the core energy source is fossil-fuel based.
 • Nuclear power generation.
 • Direct waste incineration.
 • Alcohol, weapons, tobacco, gaming, or palm oil industries.
 • Renewable energy projects generating energy from biomass using feedstock originating from protected areas. For the purpose of these Directions, Feedstock primarily includes sewage, manure, wastewater, bagasse, biomass, wood pellets, etc.
 • Landfill projects.
 • Hydropower plants larger than 25 MW.

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/DOR/2025-26/364 · issued 28 Nov 2025. The plain-English explanation above is BankPulse’s own independent summary.

Test yourself

Quick self-check built only from the facts already on this page — tap a question to reveal the answer.

Q1. In one line, what does this circular do?

RBI issues directions for NBFCs to manage climate change risks and promote green finance, including guidelines for green deposits and financing frameworks.

Q2. Who does this circular apply to?

Non-Banking Financial Companies (NBFCs), Deposit-taking NBFCs (NBFC-D), Deposit-taking Housing Finance Companies

Q3. What is the first thing you should do about it?

NBFCs must put in place comprehensive Board-approved policies on Green Deposits and Financing Framework

Key dataSee the live numbers behind this topic: NPA / Asset-Quality Tracker, Bank Health Scores — updated from official RBI data.

Key termsPlain-English definitions of terms in this circular — see the full Indian banking glossary. NBFC · CRAR (Capital adequacy) · Gross NPA (GNPA) · Wilful defaulter

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Who does what — compliance checklist

📜 Compliance

NBFCs must put in place comprehensive Board-approved policies on Green Deposits and Financing Framework
NBFCs must ensure that green deposits are earmarked for allocation towards green finance
NBFCs must report on their green finance activities and disclose relevant information to depositors

Grouped from the action items above — a single circular may involve more than one team.

Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (Non-Banking Financial Companies (NBFCs), Deposit-taking NBFCs (NBFC-D), Deposit-taking Housing Finance Companies), your first concrete step on “RBI Directions on Climate Finance for NBFCs” is: “NBFCs must put in place comprehensive Board-approved policies on Green Deposits and Financing Framework” (RBI issued this 28 Nov 2025).

Circular: RBI/DOR/2025-26/364 -- RBI Directions on Climate Finance for NBFCs
Issued: 28 Nov 2025
Action required: NBFCs must put in place comprehensive Board-approved policies on Green Deposits and Financing Framework
Action required: NBFCs must ensure that green deposits are earmarked for allocation towards green finance
Action required: NBFCs must report on their green finance activities and disclose relevant information to depositors
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________

Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

AI-drafted · AI fact-check pending · under the editorial review of our expert review panel · decoded & published by BankPulse · 06 Jul 2026, 23:38 IST

Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12940&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert review panel. Independent platform, not affiliated with the Reserve Bank of India; never reproduces RBI text verbatim.