Introduction
Green financial technology (hereinafter referred to as “green fintech”) is reshaping India’s financial sector by weaving environmental, social, and governance (“ESG”) criteria into everyday products and services. It is where sustainability meets digital finance, covering everything from ESG-based credit scoring and climate-conscious loans to carbon-tracking applications and blockchain-enabled carbon markets. For example, digital lenders are offering loans to gig workers with electric vehicles (“EV”), financing solar projects for farmers, and enabling investment platforms to provide portfolio-level company ESG scores. These innovations run on state-of-the-art APIs that capture data directly from carbon calculators, satellite imagery, or ESG data providers into the financial platform. Meanwhile, Indian regulators continue to push for sustainability within the financial system. The Reserve Bank of India (“RBI”) and the Securities and Exchange Board of India (“SEBI”) are working towards mandating climate risk disclosures and ESG disclosures.
LEGAL LANDSCAPE IN INDIA
India’s regulators are fast-tracking the process of aligning finance with sustainability. In 2024, the RBI came out with a Draft Disclosure Framework on Climate-Related Financial Risks. Entities like banks and large non-banking finance companies would report on how climate concerns are governed, strategies are formulated, and risks are assessed, as well as on the nature of metrics involved. The draft prescribes a two-tier disclosure mechanism, baseline and enhanced, designating climate-risk oversight at the board level and financed emission targets as mandatory disclosures. The RBI is adopting a phased approach for the timeline; for example, scheduled commercial banks are to start governance/risk disclosures in FY2025-26 and full metrics/targets disclosures by FY2027-28. The draft explicitly sets phased implementation: governance/risk disclosures from FY2025–26, and metrics/targets from FY2027–28. More importantly, the RBI has proposed exploring climate stress testing for loan books and perhaps calculating the total carbon emissions of borrowers by sector. Going forward, climate-conscious lending is expected to influence prudential norms similar to Basel requirements, rather than being directly incorporated into Basel norms.
Besides banking, SEBI, the capital market regulator, has made it mandatory for large listed companies to provide their ESG disclosures. Under SEBI’s Business Responsibility and Sustainability Report (“BRSR”) guidelines, detailed environmental and social aspects must be disclosed by companies mandated in 2021, effective from FY2022–23, for the top 1000 listed entities. This mandate is intended to align India’s disclosures with global frameworks such as the EU CSRD and TCFD, though these are not binding in India. Therefore, Indian fintechs issuing equity or bonds should see that the ESG details of investee companies are indeed verifiable. New frameworks are available for green bonds and sustainability-linked loans, with incentives being provided for projects such as solar farms and energy-efficient manufacturing.
Key Regulations
Green fintech products must navigate a rapidly evolving regulatory landscape in India. A climate risk disclosure framework is being proposed by the RBI Draft 2024. It sets phased requirements of governance/risk disclosures from FY2025–26 and metrics/targets from FY2027–28, with climate impact-related stress testing proposed as part of the framework, but not yet mandatory. On the capital market side, SEBI has introduced an additional layer of disclosure through the BRSR within the ambit of the Listing Obligations and Disclosure Requirements (“LODR”) Rules. Mandated in 2021, effective from FY2022–23, the top 1000 listed companies have been required to offer structured ESG reporting as per the globally accepted standards. The investor community demands transparency into such issues. Another key issue is digital lending. The RBI Digital Lending Guidelines, 2022 create an exhaustive set of codes for online lending. Due diligence of LSPs upfront, borrower-friendly disclosures, data privacy safeguards, and stringent KYC and AML checks. These will apply to climate-fintech lenders as they would to any other digital lenders. Lastly, there is strict compliance with the Digital Personal Data Protection Act (“DPDPA“) 2023 and cybersecurity norms of the RBI. API-based services must strictly adhere to the code for the lawful processing of personal data and, where applicable under RBI or CERT-In rules, ensure compliance with data localisation and the 6-hour incident reporting requirement for specified cyber events.
Building Compliant Green Finance APIs
When designing APIs for ESG-related products, it is a tightrope walk between innovation and compliance. On the technical side, developers must observe secure industry standards such as REST/JSON endpoints, TLS encryption, and an authentication protocol such as OAuth2. On the other hand, an API must have defenses, input validation against injection, rate limiting against misuse, and versioning in case the updated API breaks an integration already built against the previous version. But every green finance API carries legal consequences. Even ‘carbon scoring’ a loan must be transparent about data sources and carry disclaimers to remedy accusations of knowingly making unsupported claims. A green loan or financing product, if reviewed through the API, must comply with the RBI lending guidelines. Governance is equally important. Contracts with providers of ESG data must stipulate liabilities if there are errors. The RBI expects banks and fintechs to audit API security on a regular basis. This practically means legal and technical teams must collaborate closely to ensure every API call is both secure and compliant.
AMLEGALS Remarks
Green fintech has ceased to be a mere niche and is fast becoming the core of financial services operations in India in the coming decade. APIs are the invisible infrastructure that enable climate-aware lending and ESG-driven products, and their design cannot be divorced from compliance. Regulators like the RBI and SEBI are piecing together frameworks that require transparency and accountability. For fintechs, the challenge is balancing innovation with legal foresight. Constructing APIs that are both secure, reliable, and compliant is, therefore, not a technical end but a strategic requirement. Companies that are able to strike this balance will be able to spearhead the transition of India into sustainable finance and lay the foundation of long-term trust with investors, customers, and regulators.
For any queries or feedback, feel free to connect with hiteashi.desai@amlegals.com