IDFC FIRST Bank’s Role in Financing India’s Green Transition

Introduction

India has set ambitious sustainability targets, including installing 500GW of non-fossil energy capacity by 2030 and achieving net-zero emissions by 2070. Achieving these goals will require massive investments—on the order of Rs 30 lakh crore by 2030 for renewable energy alone. Themes such as green mobility are also critical for achieving this. The banking sector plays a pivotal role in mobilising this green finance. IDFC FIRST Bank has emerged as a proactive financier of India’s green transition. This article examines the bank’s contributions in electric vehicle (EV) financing, renewable energy, and green-certified infrastructure, and analyses how these efforts compare with other banks and impact India’s economy and sustainability goals.

Pioneering Green Finance at IDFC FIRST Bank

IDFC FIRST Bank’s sustainability strategy is anchored on three key pillars— integrating ESG into its products and services; ingraining sustainability within the organisation; and aligning to global and national frameworks on ESG. The bank’s green financing focus is evidenced by its focus on EV financing, lending towards energy-efficient consumer durables, supporting green home financing and enabling renewable energy adoption. The bank is also one of the first institutions in India to proactively adopt global frameworks to manage its environmental and social risks in large-scale lending.

Financing EVs

IDFC FIRST Bank is among the market leaders in financing electric two-wheelers, an important segment for India’s e-mobility push. As of March 2024, the bank had financed nearly 2,00,000 electric two-wheelers (primarily e-scooters and bikes) and thousands of electric three-wheelers. This sizeable portfolio reflects tie-ups with numerous EV manufacturers and dealerships, enabling consumers to buy EVs with low down payments and competitive interest rates.

By financing EV purchases, IDFC FIRST Bank helps accelerate the adoption of cleaner transportation. These loans not only support India’s target of 30% electric mobility by 2030, but also contribute to reducing urban air pollution and oil import dependence. Each EV on the road replaces a petrol or diesel vehicle, cutting tailpipe emissions and fuelling a green economic ecosystem of manufacturers, service provider, and charging networks.

Embracing Renewable Energy

IDFC FIRST Bank has commenced lending towards retail and commercial solar rooftop installations, helping augment India’s green mission. The bank also funds renewable energy transition through corporate lending. It has also extended credit lines to green NBFCs, thus indirectly financing residential and SME solar projects. By backing such projects, the bank helps bring clean electricity to new consumers and contributes to India’s renewables boom (the country’s renewable capacity reached ~203GW in 2024). This translates into significant carbon emissions reduction over the project lifetimes and helps India inch closer to its climate commitments under the Paris Agreement.

Going Green

Green infrastructure includes buildings and facilities that meet high environmental standards, as well as infrastructure for water, waste and sanitation management. IDFC FIRST Bank has been leading by example with its own facilities. In fact, 21% of the bank’s infrastructure is green-certified with its corporate headquarters in Mumbai certified as Platinum by the Indian Green Building Council (IGBC). The bank is also influencing retail consumption of green homes, by incentivising home loans taken against green buildings.

On the lending side, IDFC FIRST Bank provides loans for projects such as certified green buildings, sustainable real estate developments and public infrastructure that carries environmental certifications. It has also included WASH (water, sanitation and hygiene) financing as part of responsible lending—having lent over Rs 1,000 crore towards building toilets, water supply systems and waste management facilities, benefitting 1.4 million individuals. While these WASH projects address social and public health needs, they are aligned with environmental sustainability goals by improving water quality and sanitation.

Enabling Green Financing

To drive green financing, IDFC FIRST Bank and its peers employ a range of financial instruments and products tailored for sustainability:

• Green Bonds: These are bonds whose proceeds are earmarked for green projects. By tapping such bonds, banks can attract investors specifically interested in climate-friendly projects. IDFC FIRST Bank’s strong green lending portfolio could in future be financed through green bond issuances, reflecting the bank’s commitment to transparent use of proceeds for sustainability.

• E&S-aligned Lending: These are loans given to projects and activities that have a defined outcome in terms of avoided emissions, greener infrastructure, sustainable mobility etc. IDFC FIRST Bank has integrated environmental risk assessment in its credit process for large projects and large-scale lending, ensuring that the financing meets required environmental and social (E&S) standards.

• Green Deposits: In 2024, IDFC FIRST Bank launched its Green Deposits programme in line with RBI’s framework for acceptance of green deposits. These are fixed deposits from customers where the funds are earmarked exclusively for financing green projects. The bank’s customers can also thus participate in ushering in a green transition. Depositors can thus directly contribute to eco-friendly ventures while earning interest. IDFC FIRST Bank’s green deposits carry the same security and return as regular deposits, with the bank committing to deploy the proceeds towards areas like renewable energy, energy efficiency and clean transportation.

Sustainability-Linked Loans (SLLs): These are loans where the interest rate or other terms are tied to the borrower’s performance on sustainability targets (such as reducing emissions or improving energy efficiency). While still nascent in India, SLL structures are emerging as tools to encourage corporate borrowers to meet ESG benchmarks. For instance, if the bank lends to a large corporate for a capex project, it could incorporate interest reductions if the company meets predetermined carbon reduction goals.

In addition to the above, instruments like lines of credit from international development institutions are also utilised for green finance. IDFC FIRST Bank can also potentially tap global climate finance to augment its lending capacity for climate projects.

Green financing initiatives of selected Indian banks

Impact on Economy

IDFC FIRST Bank’s green financing activities, alongside those of other banks, have a multiplier effect on India’s economy. Investments in renewable energy and EVs stimulate industrial growth, create jobs and contribute to GDP expansion. When a bank finances a renewable energy initiative, it fosters an ecosystem of component manufacturers, engineers, maintenance services and ancillary industries.

Employment

Green projects are significant job creators. India’s renewable energy sector employed an estimated 1.02mn people in 2023, in roles ranging from project development to installation and operations. As banks like IDFC FIRST Bank finance this RE transition, they indirectly support this green workforce. Similarly, the EV push financed by banks is creating jobs in EV manufacturing plants, battery assembly, charging station operations and vehicle maintenance. According to government estimates, India’s EV industry could generate 5 crore direct and indirect jobs by 2030 as it grows to a Rs 20-lakh-crore market. By providing Rs 4 lakh crore of financing to EV buyers and companies by 2030 (as projected), banks will be instrumental in unlocking this employment potential.

GDP and Industrial Growth

Green financing also contributes to India’s GDP by enabling domestic industries in sunrise sectors. The production of solar panels, wind turbines, electric vehicles and batteries all stand to benefit from easier access to credit. Moreover, the energy produced by renewable projects adds to India’s power supply, supporting productivity and reducing power outages that previously hampered economic activity.

There is also a macroeconomic benefit–greater adoption of renewables and EVs reduces reliance on imported coal and oil, improving India’s trade balance over the long term. The capital that would have gone into fossil-fuel imports can instead circulate within the domestic economy, further contributing to GDP.

Sustainability Goals

Perhaps the most crucial impact of green financing is on India’s environmental and climate targets. Every EV loan or green power project financed moves the needle on India’s Nationally Determined Contributions (NDCs). IDFC FIRST Bank’s financing of EV two-wheelers, for example, aids in cutting vehicular emissions in cities. Its lending to renewable energy helps avoid greenhouse gas emissions from coal-based power. These contributions aggregate with others: as of 2024, India is fourth globally in renewable capacity and is rapidly scaling solar and wind installations. Green financing is enabling India to aim for 50% of its electricity generation from non-fossil sources by 2030 and to lower the carbon intensity of its economy by 45% (from 2005 levels) by 2030.

Moreover, by investing in projects like sustainable infrastructure and WASH, banks support several UN Sustainable Development Goals (SDGs)—clean energy (SDG7), industry and infrastructure (SDG9), sustainable cities (SDG11), climate action (SDG13) and clean water and sanitation (SDG6).

The social co-benefits, such as improved public health from better sanitation or reduced air pollution from EVs, reinforce inclusive growth, which ultimately reflects in human capital and economic productivity.

Conclusion

IDFC FIRST Bank’s role in financing India’s green transition exemplifies how the financial sector can be a catalyst for sustainable development. Through targeted support for EVs, renewables and green infrastructure, the bank has not only built a growing green asset portfolio but also helped mainstream the idea that investing in sustainability makes business sense. Its initiatives—from pioneering EV loans to launching green deposits—demonstrate innovation in aligning banking products with climate goals. This has also helped the bank significantly improve its ESG scores as well across key ratings.

Banks collectively still allocate a relatively small share of their lending to green sectors (well under 10% of total credit at present), but this share is on the rise. In this landscape, IDFC FIRST Bank’s strategy positions it to capture new growth while advancing national climate priorities. Going forward, as India’s demand for green capital swells (tens of trillions of rupees needed this decade for the clean energy transition), banks will need to scale up financing using all instruments available, including green bonds and sustainability-linked credit. Strong policy support, such as priority-sector status and interest subventions for green projects, will further encourage banks.

In sum, IDFC FIRST Bank’s experience suggests that green financing is a viable growth avenue for banks that also yields positive externalities for the economy and environment. By funding a low-carbon future, IDFC FIRST Bank is contributing to India’s sustainable GDP growth and helping to secure a greener, more resilient future for the country. Its role, alongside other financial institutions, will remain vital in driving the transition from ambition to achievement on India’s green goals.