A new report has flagged India top banks including SBI, ICICI Bank, and Axis Bank for their deep financial entanglement with the coal sector, hindering the country’s transition to clean energy. The analysis by Bengaluru-based think tank Climate Risk Horizons reveals that Indian banks have poured nearly $29 billion into coal between 2016 and 2023 through loans and underwriting, placing India among the top seven nations globally in coal financing from 2021 to 2023.
The State Bank of India emerged as the leading public sector lender, while private banks like Axis and ICICI played a key role in underwriting, a process that enables coal companies to raise capital without banks directly carrying long-term risks. Interestingly, public banks accounted for 68% of coal loans, while private banks dominated underwriting with 80% of indirect financing.
Globally, coal underwriting is the main financial channel, with over 484 banks funneling $1.2 trillion into coal through these indirect routes from 2019 to 2021. The report warns that while underwriting may appear less risky or cleaner than direct loans, it still fuels coal expansion and delays India’s net zero ambitions.
Despite growing climate awareness, only three Indian banks Federal Bank, RBL Bank, and Suryoday Small Finance Bank have adopted formal coal exclusion policies, unlike over 80 international banks that are shifting away from fossil fuel investments.
The report also highlights the economic disadvantages of coal. Electricity from upcoming coal plants costs ₹6.19–₹7.24 per kWh, whereas round-the-clock renewable energy with storage is already cheaper, at just ₹3.5–₹4.5 per kWh. Repurposing old coal sites for solar could further bring down energy costs to ₹1.87–₹2.69 per kWh.
Still, India has 55 GW of coal capacity in the pipeline as of January 2025, much of it tied to costly power purchase agreements (PPAs) that guarantee profits regardless of actual electricity demand. These rigid contracts are straining state-run Discoms, especially in Tamil Nadu and Maharashtra.
Projections show that coal plant utilisation could plummet to just 10% by 2035, leaving ₹8.1 lakh crore worth of assets stranded by 2046. This scenario poses severe financial risks for banks and investors unless they proactively shift to green finance.
The report calls on major banks to urgently adopt transition plans, phase out coal, and redirect funds toward renewable energy sectors such as solar and wind manufacturing, battery storage, and grid infrastructure. Without this shift, India’s banking sector risks not only climate backlash but also long-term economic fallout.