SLR Cut and Green Finance Institution Proposed to Fund India's Net Zero
India has put a price on net zero. The harder question now is whether its banks can carry it.
India's banks and non-bank lenders would have to supply 83% of the debt behind a $22.7 trillion net-zero transition, according to a briefing note published September 30 by IEEFA and the Grantham Research Institute at LSE. Even after domestic reforms, the numbers leave a shortfall of nearly $6.5 trillion that only international capital can close.
Scrutiny Shifts From the Price Tag to the Financial Plumbing
NITI Aayog set the headline figure in February 2026 with Scenarios Towards Viksit Bharat and Net Zero, a study built on ten inter-ministerial working groups. Its $22.7 trillion cumulative requirement to 2070 runs roughly $8 trillion above spending under current policies, and the power sector accounts for more than half of it.
The new note moves the debate from scale to delivery. Its four authors include Venugopal Mothkoor, NITI Aayog's own lead for energy modelling and climate finance, writing alongside analysts from IEEFA South Asia, LSE Grantham and the Climate and Sustainability Initiative. That makes it less an outside critique than a stress test of the government's own arithmetic, and the title calls the ambition tempered.
Mobilisation Plan Rests on Bank and NBFC Balance Sheets
NITI Aayog's financing analysis estimates that reforms could mobilise $16.2 trillion by 2070, with international flows making up about 19% of that sum. Commercial banks and NBFCs would provide 42% of all financing. Institutional investors and corporations would add 36%.
On the debt side the dependence is sharper. Banks and NBFCs account for 83% of projected debt financing, while India's corporate bond market sits at roughly 16% of GDP. The briefing calls that market "shallow and dominated by financial institution issuers," which means the main alternative to bank credit is itself largely an extension of the lending system.
Three Reforms Aim to Widen the Funding Base
The authors set out three levers. First, a deeper corporate bond market, built on a stronger rulebook, improved market infrastructure and a smoother route to issuance for mid-sized companies. Second, a gradual cut in the statutory liquidity ratio toward its 18% regulatory limit, freeing bank capital now held in government securities for green infrastructure. Third, a dedicated green finance institution built to structure blended finance, a proposal the authors argue merits serious consideration.
Concentration Turns Transition Risk Into Banking Risk
The implications run in several directions. Power, grid and storage assets have lives measured in decades, and funding them mainly through deposit-financed lenders revives the tenor mismatch that weighed on Indian infrastructure lending in the last investment cycle. Sustainability and risk teams at lenders should expect closer supervisory interest in how climate exposure is concentrated across their books.
The SLR lever carries its own tension. Every rupee banks move out of government securities is a rupee of captive demand the sovereign borrowing programme loses, so the question is whether the Finance Ministry and RBI accept higher funding costs for the state as the price of greener credit.
The external gap matters for diplomacy as much as finance. Spread evenly to 2070, $6.5 trillion works out to roughly $150 billion a year. The New Collective Quantified Goal agreed at COP29 targets $300 billion a year by 2035 for all developing countries combined. India's need alone would absorb about half of that, which strengthens New Delhi's case that current multilateral pledges fall well short.
What to Watch
The clearest signals will come from three places. RBI's policy statements will show whether any easing of SLR expectations is on the table. Union Budget 2027-28 in February is the first realistic window for a green finance institution or blended finance vehicle to appear with funding attached. And at COP31 in November, watch whether India cites the $6.5 trillion figure in finance negotiations, which would turn a domestic modelling exercise into a bargaining position.
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