IDBI Bank forays into carbon credit trading advisory

IDBI Bank has forayed into carbon credit trading advisory services, probably the first Indian bank to tap into the big business opportunity.

The planning commission has estimated that India might receive about Rs 30,000 crore from carbon credit sales over the next three to four years.

The entry into carbon credit trading is part of IDBI Bank's attempt at refurbishing its image as an investment bank by leveraging the strengths of companies which had received project funding from it as a development bank.

Carbon credit is usually generated by countries in emerging economies and these are used by developed countries' signatories to the Kyoto Protocol.

Under the protocol, countries in Europe and UK are committed to bring down the level green house gases ( GHG) by 8 per cent from the present level. GHG is affecting the safe layer of ozone in the atmosphere , thus causing pollution.

The bank will act as an intermediary for arranging buyers and sellers for carbon credits and also help the companies generating such credits for registration as certified credits eligible for trading within the guidelines framed by the United Nations' Kyoto protocol.

Carbon credit is usually generated by countries in the emerging economies and are used by developed counties, which are signatories to the Kyoto Protocol. Under the protocol, Europe countries are committed to bring down the level of green house gases (GHG) by 8 per cent from the present level.

While the pollution level could be brought down by restructuring the industrial set up in developed countries, this is highly cost intensive.

Rather, developing countries which have lower level of GHG can generate credits from their industrial outfits which could be purchased by units in the developed economies.

Similarly, the bank is actively involved along with foreign banks in "stress funding". Stress funding is capitalising the companies which have turned weak due to unfavourable economic cycle but have brighter prospects ahead.