IFSCA mandates IFCS banking units to develop a comprehensive policy on sustainable linked lending

Notification No. F. No 584/ IFSCA/Sustainable Finance- LF/2022-23/001, Dated, 26.04.2022

The IFSCA has issued a guidance framework on sustainable linked lending by Financial institutions wherein it has directed all IFSC Banking Units (IBUs) and Finance Company/Finance Units (FC/FUs) to develop a comprehensive Board approved policy on green/social/sustainable/sustainability-linked lending by Mar 31, 2023. As per the framework, from Apr 1, 2023, 5% of the gross loans and advances shall be directed towards green/social/sustainable/sustainability-linked sectors/facilities. In case, if the IBU or FC/FU is unable to meet the above targets it shall report to the Authority explaining reasons for non-compliance of the same and shall provide future action plan towards ensuring compliance with this framework.

Further an entity licensed/registered post issuance of this framework shall get a time period of 12 months, from the date of commencing its operations, to put in place a Board approved policy.

The framework is divided into four broad areas namely:

(a) Part A: Guidance on green/social/sustainable lending

(b) Part B: Guidance on sustainability linked lending.

(c) Part C: Guidance on short term financing/working capital finance (green / social / sustainable).

(d) Part D: Reporting framework. (The reporting will begin from half year ending September 30, 2023.

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