One problem this can lead to is that it can create incentives that skew lending decisions and credit allocation more broadly. To be clear, I don’t want to give the impression that banks’ lending decisions are driven solely, or even primarily, by regulatory capital requirements. Bank lending is influenced by a variety of factors – capital requirements are just one.
As early as in December 2007, banks in India were sensitized to the various international initiatives including the Equator principles and were asked to keep abreast of the developments in the field of sustainable development and corporate social responsibility and dovetail / modify their lending strategies / plans in the light of such developments. 17.