Securitisation as an enabler of green asset finance in India

The document argues that while India has a growing green bond market, it primarily funds utility-scale projects, leaving a gap for small-scale green investments. It proposes green securitisation (ABS) as a mechanism to pool small loans for rooftop solar, electric vehicles, and sustainable agriculture, allowing non-bank financial institutions (NBFCs) to offload assets and increase lending capacity. The report identifies regulatory hurdles, such as strict credit rating requirements for institutional investors and a slow judicial system for contract enforcement, and provides six recommendations to increase the supply and demand for green ABS.

• India faces a massive investment gap for green infrastructure, with an estimated USD 4.5 trillion needed over ten years for renewable energy and urban sustainability, and USD 200 billion specifically for expanding non-fossil fuel generation to 450 GW by 2030.
• Conventional bank financing in India often fails to reach poor households and MSMEs due to a lack of collateral, small credit volumes, and stringent risk mitigation norms, such as requiring a record of at least 3 years of financial statements.
• Existing green bond issuance in India, totaling USD 10.3 billion as of December 2019, is heavily concentrated in utility-scale renewables, which account for over 80% of allocations, and has not significantly benefited households or MSMEs.
• Green ABS can enable lenders to meet Priority Sector Lending (PSL) targets, which mandate that banks lend at least 40% of their Adjusted Net Bank Credit to specific sectors including agriculture and MSMEs.
• The report identifies several asset classes in India suitable for green securitisation, including residential rooftop solar, electric vehicle loans, and sustainable agriculture microfinance.
• The demand for ABS in India is hindered by regulatory caps on investments for institutional investors; for example, the IRDAI caps insurance company investment in ABS at 10%, and the PFRDA limits pension fund investment to 5%.
• India's judicial system is a significant deterrent for international ABS investors, ranking 164th out of 190 countries for the ease of enforcing contracts, with an average enforcement time of around 4 years.
• To increase the supply of green ABS, the report recommends extending Priority Sector Lending classifications to all green assets and establishing state-level pooled funds to act as warehousing facilities for small loans.
• To increase demand, the report suggests relaxing credit quality requirements for insurance and pension funds, allowing them to invest in ABS rated between BBB and AA.

APA

Vaze, P., Bhattacharya, S., Kumar, N., Filkova, M., & Giuliani, D. (2019). Securitisation as an enabler of green asset finance in India. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/Securitisation-as-an-enabler-of-green-asset-finance-in-India.pdf

Chicago

Vaze, Prashant, Sandeep Bhattacharya, Neha Kumar, Monica Filkova, and Diletta Giuliani. Securitisation as an enabler of green asset finance in India. Climate Bonds Initiative, 2019. https://www.climatebonds.net/files/documents/publications/Securitisation-as-an-enabler-of-green-asset-finance-in-India.pdf.

Wikipedia

{{cite report |last1=Vaze |first1=Prashant |last2=Bhattacharya |first2=Sandeep |last3=Kumar |first3=Neha |last4=Filkova |first4=Monica |last5=Giuliani |first5=Diletta |title=Securitisation as an enabler of green asset finance in India |publisher=Climate Bonds Initiative |date=December 2019 |url=https://www.climatebonds.net/files/documents/publications/Securitisation-as-an-enabler-of-green-asset-finance-in-India.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{vaze2019securitisation, author = {Vaze, Prashant and Bhattacharya, Sandeep and Kumar, Neha and Filkova, Monica and Giuliani, Diletta}, title = {{Securitisation as an enabler of green asset finance in India}}, institution = {Climate Bonds Initiative}, year = {2019}, month = dec, url = {https://www.climatebonds.net/files/documents/publications/Securitisation-as-an-enabler-of-green-asset-finance-in-India.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }