Scroll through your social feed and you’d think India’s NBFC world has never looked greener. Glossy brochures and LinkedIn posts parade ‘green finance’ as the next big thing!
‘Green finance’ has popped up as the favourite catchphrase of nearly every lender out there, who are eager to show off its eco-credentials in a handful of buzzworthy sectors.
But does this gloss translate into real change on the ground?
After all, what good is slapping a ‘Green’ label on a loan if all the heavy lifting goes into glossy advertising rather than action?
This is where the word ‘Greenwashing’ comes in.
Greenwashing occurs when NBFCs and private lenders pour more effort into eco‑PR than into actual environmental practices. Behind closed doors, even stakeholders concede that the industry excels at branding long before it delivers genuine sustainability.
The Taxonomy Void: Definitions Matter
India’s financial sector operates within a rigorously regulated framework, guided primarily by the Reserve Bank of India and SEBI to ensure stability, transparency and market integrity.
Against this tightly regulated backdrop, green financing in India has slowly emerged as a strategic priority for both regulators and lenders. However, this sector still showcases some loopholes at the grassroots level.
Expressing her take on this, Neha Khanna, Associate Director, Climate Policy Initiative (CPI) refuses to sugarcoat the reality, saying, “It would be misleading to claim that the entire industry is uniformly embracing or ignoring green financing. It is also unrealistic to expect the entire sector to lead the green finance charge independently, especially within a short timeframe. The larger banks themselves are still navigating these new concepts.”
Her words cut to the heart of India’s financial culture, stressing that until regulators furnish a playbook, NBFCs will not voluntarily step onto the green field. They will wait for the referee’s whistle, that is a government‑mandated taxonomy or explicit RBI directive before committing resources or reputational capital.
Anjan Ghosh, Senior Advisor, Climate Policy Initiative (CPI), points to the semantic loopholes that flourish in this waiting game, regarding the exact definition of ‘Green’, saying, “Although much lending already supports ‘green’ sectors, inconsistent definitions mean these loans are not always labelled as such.”
Without a single, authoritative taxonomy, any loan to an electric vehicle or solar pump can be dressed in green investments. The result is a credibility gap, where product labels obscure a glaring lack of standardisation.
Measurement vs Monitoring
Neha draws a distinction between monitoring and measurement, saying, “Accurate measurement is fundamental, however, without data, mitigation is impossible. While Top NBFCs publicly disclose ESG metrics, smaller NBFCs may measure their impacts internally without releasing data. The lack of public disclosure does not necessarily mean they are inactive.”
Economists and Think Tanks: Guardians of Integrity
In theory, economists and legal experts serve as guards against greenwashing, on the other hand, in practice, their models often remain advisory rather than mandatory.
Abhishek Saxena, Advocate Partner, Saxenas and Kumar Law Chambers LLP, underscores its limitations, saying, “Think tanks develop and hone instruments for measuring impact, so that sustainability claims are clear and verifiable. Through offering unbiased, evidence‑based analysis, think tanks assist in verifying or disproving industry assertions regarding the effect of financial products, minimizing the chances of green washing.”
When data collection and disclosure are voluntary, the very tools designed to expose spin become optional props, undermining their own purpose.
Role of External Watchdogs
The legal experts tasked with translating policy into practice expose a regulatory mosaic riddled with significant gaps and overlaps.
Abhinav Saxena, Advocate Partner, Saxenas and Kumar Law Chambers LLP warns that robust monitoring demands a harmonised green taxonomy and better inter agency coordination (RBI/SEBI), and he urges a mandatory, phase wise disclosure regime under RBI’s forthcoming climate disclosure framework, complemented by capacity building and third-party verification, to ensure that green finance delivers real environmental benefits rather than mere branding
His insight reveals two overlapping regulators, RBI for lending, SEBI for bonds and disclosures, operating without a harmonised framework. NBFCs can navigate between them, exploiting jurisdictional seams to dodge rigorous monitoring.
Abhishek Saxena presses for enforcement mechanisms he believes are sorely lacking, and explains, “Implement clear penalties for misleading or false sustainability claims… use advanced monitoring and analytics tools to detect inconsistencies in sustainability claims.”
Yet despite the proposals, no binding sanctions have materialised. In the absence of enforceable penalties, greenwashing remains a low‑risk marketing strategy.
Inclusivity at the Grassroots
From the perspective of an all-green finance-based lender, Nehal Gupta, Founder & Managing Director, Accelerated Money For U, mentions that green finance must translate into tangible benefits for everyday borrowers.
“Our promise isn’t a glossy infographic; it’s a working battery on someone’s first day behind the wheel,” says Nehal.
Nehal stresses that AMU’s lending model deliberately shifts away from conventional credit score reliance toward an ‘asset and income’ framework, implying that truly inclusive green finance demands bottom-up underwriting techniques and in field outreach, far beyond mere marketing of ‘Green loans.’
She explains that AMU underwrites electric‑vehicle loans based on cash‑flow data and field verification rather than formal credit scores, deploys low down‑payments and doorstep servicing to eliminate digital barriers, and partners with SEWA/SIDBI and the EV Risk‑Sharing Programme to provide partial credit guarantees, ensuring that sustainability targets are met not in boardrooms but on India’s streets.
Evaluating Social Impact Beyond Carbon Metrics
Beyond simply tallying tonnes of CO₂ avoided, AMU’s approach to social impact measurement reveals a deeper ambition, that is, to uplift livelihoods, broaden financial inclusion and enhance everyday well‑being.
As Nehal points out, “Our field teams regularly engage with customers through surveys and interviews to understand improvements in daily living standards, including reduced health risks from cleaner technology and time saved through more reliable transport.”
By deliberately targeting women, informal workers and rural communities, AMU ensures its loans reach those often overlooked by formal finance. Yet inclusion is judged not merely by borrower counts but by the quality of the experience: how swiftly an applicant can complete paperwork, how comfortably they manage repayments and how embedded they feel in community support networks.
This dual emphasis on quantitative outcomes and qualitative feedback drives AMU to continually refine its products, as Nehal emphasised, “We measure inclusion not just by numbers but by the quality-of-service delivery, such as onboarding ease, flexible repayment schedules, and community engagement.”
A Sector at Crossroads
When ‘green finance’ can be stamped onto any asset with a solar angle, and when verification remains optional, India’s NBFC sector stands at a crossroads.
Regulatory imperatives have set the tempo, but genuine green lending remains sporadic, defined more by compliance checkboxes than by measurable carbon reductions.
Until the regulators blow the whistle and the rules become mandatory, the sector’s sustainability claims will continue to oscillate between earnest innovation and opportunistic greenwashing.
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