Green lending: A route to improved loan quality in Indian banks

Abstract

This study investigates the relationship between noncarbon-intensive lending and the loan portfolio quality of Indian banks. We combine the sectoral emissions and each bank's sectoral lending data to assess the carbon exposure of bank loans and construct the noncarbon-intensive lending variable. The study reveals a significant non-linear relationship, highlighting the long-term strategic importance of noncarbon-intensive lending in improving loan portfolio quality.