MOHD AVI HOSSAIN AND IYANATUL ISLAM | 20-MINUTE READ |

Setting the context

Optimists dream of a future in which South Asia will approach the living standards of the rich Western nations of today in about two decades. For example, India has set itself a goal to become a developed country by 2047, which coincides with the 100th anniversary of its independence.[1]

Such optimism relies on the notion of a smooth and sustained convergence in living standards between rich and poor countries. Rapid and sustainable growth is certainly a necessary condition for attaining national prosperity, but not sufficient. Given that global discourse is now dominated by the consensus that holistic development means going well beyond growth, what matters for South Asia’s future is achieving the Sustainable Development Goals (SDGs). Unfortunately, South Asia has fallen far behind in terms of meeting the SDGs by 2030, as a subsequent discussion will highlight. Resolving this challenge will require prudent national policies and a conducive global environment.

Among the various government agencies that play a pivotal role in the promulgation and implementation of national policies, two institutions stand out: central banks and finance ministries. In the hierarchy of government agencies, central banks occupy a premier position. Indeed, in many parts of the world, central banks are given legally mandated operational independence so that they are free from political interference.[2] This is a privilege that is not granted to other government ministries. Yet, ironically, when it comes to implementation of the SDGs, central banks have, at least until recently, played a passive role.

The traditional view is that the mandate of central banks is to act as guardians of price and financial stability. This will set the necessary macroeconomic environment for private sector-led growth and structural transformation that are essential for the attainment of the SDGs. This traditional view is now in a state of flux. Various epochal global events, most notably the global financial crisis of 2007-2008, have led to a rethinking of the role that central banks ought to play in a post-crisis world.[3] COVID-19 has reinforced the rethinking of macroeconomic policy. In South Asia, for example, countercyclical monetary and fiscal policies to cope with the COVID-19-led recession of 2020 became the norm rather than the exception, contrary to the prescriptions of orthodox macroeconomics (Raihan and Islam, 2026).

Central banks must ensure that they continue to play their role as guardians of stability, but they must also be able to play a major role as agents of development and economic transformation. This is where central banks in various parts of the world, including South Asia, are exploring pathways to supporting the attainment of the SDGs without jettisoning their essential task as guardians of stability.[4]  Recent research has expanded on Blanchard et al.’s (2012) discussion about central banks’ evolving roles post-crisis. Studies have explored broader mandates, unconventional policy tools, financial stability, and the impact of global shocks like COVID-19, which revealed the need for monetary-fiscal coordination. Dikau and Volz (2021) highlight increasing attention to climate and social issues. Collectively, these studies emphasise that central banks must balance traditional responsibilities with new global demands.[5]

Central banks and SDGs

The paper examines how South Asian central banks intersect with SDG 5 (gender parity), SDG 8 (decent work and economic growth), SDG 13 (climate action), and SDG 17 (global partnerships). This central bank-SDGs link aligns closely with findings from the Sustainable Development Report 2025[6]. This report provides quantitative data and comparative analysis for each country in the region, allowing us to ground the discussion in recent evidence.

SDG 5 (Gender Parity): According to the SDG Index, South Asian countries still face significant challenges in achieving gender equality. For instance, India’s score for SDG 5 is 56.7 out of 100. The gender gap in labour force participation remains wide, with female labour force participation rates below 30 per cent in Pakistan and Nepal. These statistics highlight the importance of central banks promoting gender-balanced leadership and supporting policies that advance women’s economic participation. The region’s average SDG 8 score is 63.2, with India and Bangladesh showing robust GDP growth rates of 6.5 per cent and 5.7 per cent, respectively, in 2024. However, youth unemployment remains a pressing issue. For example, the youth unemployment rate in Sri Lanka is over 20 per cent. These numbers underscore the need for central banks to foster inclusive growth by supporting job creation, expanding access to finance, and ensuring financial stability for sustainable development.

South Asia faces high vulnerability to climate risks, reflected in SDG 13 scores ranging from 49.8 (Bangladesh) to 61.3 (Sri Lanka). The report notes that only 11 per cent of energy in India comes from renewable sources, and the region’s average carbon emissions per capita have risen to 1.8 metric tons. Central banks can play a critical role by integrating climate risk into financial oversight and promoting green finance initiatives. Progress on SDG 17 is mixed, with South Asian countries scoring between 65 and 71. The Sustainable Development Report highlights that regional cooperation remains essential, especially in mobilising financing for the SDGs. International development finance flows to South Asia totalled $31.2 billion in 2024, but gaps remain in cross-border investment and knowledge sharing. Central banks are well-positioned to facilitate partnerships through regulatory harmonisation and participation in global financial forums.

Sub-regional coverage

We will offer selective coverage of the South Asian region by focusing on (1) Bangladesh, (2) India, (3) Pakistan, (4) Nepal and (5) Sri Lanka. This ensures brevity without compromising on a fair representation of the region.

SDG 5 (gender parity) and central banks

Central banks can lead by example in their personnel policy by cultivating female leadership. For example, what is the gender-based composition of monetary policy committees (MPCs), which play a pivotal role in the design and implementation of monetary policy? Are they male-dominated? We can see the composition in Table 1.

Table 1: Gender wise composition of the monetary policy committees of South Asian countries

Country	Total MPC members	Number of female members	Proportion of females (%)
Bangladesh	6	1	16.7
India	6	1	16.7
Pakistan	9	2	22.2
Nepal	5	0	0.0
Sri Lanka	7	1	14.3

Source: Authors’ compilation from the websites of the Central Banks of the respective countries. 

Table 1 highlights the gender disparity within South Asian central banks’ monetary policy committees, with female representation ranging from none in Nepal to two in Pakistan. Increasing diversity at this level is an important step towards achieving SDG Goal 5 on gender parity. Central banks and their monetary policy frameworks are instrumental in furthering the United Nations Sustainable Development Goal 5 (SDG 5), which targets gender equality and the empowerment of women and girls. Across South Asia, the composition and actions of monetary policy committees (MPCs) reflect persistent gaps in gender representation and inclusive policy formulation. The available evidence suggests that the presence of women in decision-making roles within central banks contributes to more balanced and inclusive economic policies, which in turn can address gendered barriers to financial access and participation.[7] The IMF’s research underscores that greater gender diversity in financial institutions is associated with increased stability and improved performance, as diverse perspectives foster more robust risk assessment and broader consideration of economic impacts (IMF, 2016)[8]. Yet, a new global report suggests that the goal of gender diversity in banking and financial services is under threat.[9]

Monetary policies can positively influence achieving SDG 5 by promoting financial inclusion for women, supporting products tailored to female entrepreneurs, and ensuring that credit allocation and regulatory frameworks are free from gender bias. In Bangladesh, the central bank has introduced refinancing schemes and gender quotas in lending, resulting in a 20 per cent rise in female-led SME accounts between 2015 and 2020 (Bangladesh Bank Annual Report, 2021)[10]. India’s Reserve Bank has championed initiatives such as the Stand-Up India scheme, which mandates that each bank branch support at least one female entrepreneur, contributing to a 15 per cent increase in women-owned businesses since 2016[11]. Pakistan’s State Bank launched the Banking on Equality Policy in 2021, aiming to reduce the gender finance gap by requiring banks to set targets for female customers. However, in Nepal and Sri Lanka, policy interventions remain limited, and the persistent underrepresentation of women on MPCs may constrain the development and implementation of gender-sensitive policies.

While progress has been made—particularly in India and Bangladesh—South Asian central banks must accelerate efforts towards gender parity in leadership and policy design. Enhanced female representation and targeted monetary interventions are essential to achieving SDG 5 and fostering inclusive, resilient economies across the region.

SDG 8 (decent work and economic growth) and central banks

Financial inclusion, defined as the access to affordable and appropriate financial services for all segments of society, is widely recognised as a cornerstone for achieving SDG 8. By fostering financial inclusion, central banks not only enable broader participation in economic activities but also help unlock pathways for growth, job creation, and poverty reduction. Extensive evidence from academic literature and international organisations underscores the positive relationship between financial inclusion and economic development. The International Monetary Fund (IMF) finds that greater access to financial services boosts GDP growth by facilitating investment and consumption, while the Asian Development Bank (ADB) links improved financial inclusion to higher employment rates and reduced poverty incidence.[12] Demirgüç-Kunt et al.[13] report that every 10 per cent increase in account ownership correlates with a 1.5 per cent reduction in extreme poverty rates. ADB (2021)[14] highlights that expanding access to credit for small and medium enterprises (SMEs) contributes to job creation and income growth, particularly in South Asia. IMF (2020)[15] notes that financial inclusion enhances macroeconomic stability and supports labour market resilience during shocks.

Table 2: Financial inclusion, growth, employment, and poverty reduction in South Asia: Key indicators in South Asian countries

Country	Adult account ownership (%) 2021 (WDI)	SME credit as % of GDP 2022 (ADB)	Poverty headcount ratio (%) 2022 (WDI)	Unemployment rate (%) 2023 (ILOSTAT)	Central Bank initiatives
Bangladesh	53	18	18.7	4.2	Refinancing for women-led SMEs, agent banking expansion
India	78	22	9.9	7.3	Jan Dhan Yojana, Stand-Up India, priority sector lending
Pakistan	21	7	39.3	6.1	Banking on Equality Policy, Asaan Accounts
Nepal	45	10	16.7	3.6	Financial Literacy Programs, microfinance support
Sri Lanka	83	20	11.9	5.2	Credit guarantee schemes, digital banking initiatives

Source: Authors’ calculation from World Bank, ADB and ILOSTAT (2022-24)

Table 2 provides a comparative overview of financial inclusion initiatives and their outcomes across select South Asian countries. For example, Sri Lanka demonstrates notable progress with credit guarantee schemes and digital banking initiatives, which are reflected in relatively high account ownership and access to financial services. Similarly, other countries in the region employ targeted programs such as financial literacy campaigns and microfinance support to address gaps in financial inclusion. The data highlights how central bank-led policies can drive improvements in key SDG 8 indicators, particularly by increasing access to credit and promoting digital financial services. These efforts contribute to economic growth and poverty reduction, although disparities remain, and further action is required in certain countries to achieve more inclusive financial systems.

To reflect the role of central banks in influencing SDG 8, we identified 5 major indicators that are directly linked with the specific policy tools of the central Banks in each of the countries of South Asia (sub-region) in Table 3.

Table 3: Key indicators linked with the central banks helping countries to achieve SDG 8.

Country	Relevant SDG 8 indicator	Description	Central Bank influence
Bangladesh	8.10.2	Proportion of adults with an account at a bank or other financial institution or with a mobile-money-service provider	Policy initiatives for agent banking, digital finance, and financial inclusion campaigns
India	8.3.1	Proportion of informal employment in non-agriculture employment, by sex	Microfinance regulation, credit to MSMEs, and financial literacy programs
Pakistan	8.10.1	(a) Number of commercial bank branches per 100,000 adults Number of ATMs per 100,000 adults	Banking on Equality Policy, branch expansion, and digital banking promotion
Nepal	8.1.1	Annual growth rate of real GDP per capita	Microfinance outreach, rural credit expansion, support for entrepreneurship
Sri Lanka	8.10.2	Proportion of adults with an account at a bank or other financial institution or with a mobile-money-service provider	Digital banking expansion, regulatory innovation for SME finance

Source: SDG Tracker Global https://hlpf.un.org/tools/sdg-tracker  and websites of the central banks

Table 3 highlights SDG 8 indicators—such as account ownership, informal employment rates, access to financial infrastructure, and GDP growth—that are directly shaped by central bank policies in Bangladesh, India, Pakistan, Nepal, and Sri Lanka. By targeting these indicators, central banks can amplify their impact on inclusive and sustainable economic growth in the region.

SDG 13 (climate action) and central banks  

What measures can central banks adopt in the region to encourage a green and just transition? This is critical because the South Asian region has a poor environmental record and is highly vulnerable to climate change and performs rather poorly in relation to SDG 13, as noted earlier.[16]

Central banks in Bangladesh, India, Pakistan, Nepal, and Sri Lanka have begun implementing targeted measures that support SDG 13, with varying degrees of scope and effectiveness.

Bangladesh has introduced green refinancing schemes, channelling funds into renewable energy and energy-efficient projects. The Bangladesh Bank’s Sustainable Finance Policy mandates banks to allocate at least 5 per cent of their loan portfolios to green sectors, resulting in $2.1 billion disbursed by 2023.[17] These initiatives also include concessional loans for climate-resilient agriculture, supporting vulnerable rural workers. India stands out for integrating climate risk into its financial supervision.

The Reserve Bank of India (RBI) issued guidelines on green lending and has promoted green bonds—India ranked among the top ten global issuers in 2022, raising over $7 billion. The RBI’s financial inclusion programs, such as the Priority Sector Lending framework, support green MSMEs and informal sector workers affected by climate change.

Pakistan has adopted the Green Banking Guidelines, encouraging banks to assess environmental risks in lending decisions. The central bank also supports low-cost financing for solar and wind projects, with over 1,000 MW of renewable capacity financed since 2019. These policies benefit informal workers by promoting job creation in emerging green sectors.

Nepal, though lagging in green finance outreach, has begun pilot programs for climate adaptation loans targeting smallholder farmers. The Nepal Rastra Bank recently joined national efforts to develop sustainable finance frameworks, focusing on disaster resilience and worker livelihoods.

Sri Lanka has prioritised sustainable banking practices, including environmental risk assessment and support for climate-resilient SMEs. The Central Bank of Sri Lanka is developing a taxonomy for green assets to guide financial flows, though implementation remains in early stages.[18]

While progress is uneven, South Asian central banks are increasingly adopting policies that balance environmental sustainability with inclusive growth, reflecting both global best practices and local imperatives. Table 4 depicts the connection between certain SDG 13 indicators and the role of central banks in South Asian countries.

Table 4: Key SDG 13 indicators linked with the central banks’ influence in South Asian countries

SDG 13 indicator	Central Bank influence mechanism	Country examples
13.1.2: Number of countries with national/local disaster risk reduction strategies	Financing climate adaptation and resilience projects; supporting disaster-resilient livelihoods through concessional loans	Bangladesh, Nepal
13.2.1: Number of countries with nationally determined contributions, long-term strategies, national adaptation plans, and reporting instruments	Mandating sustainable finance policies; integrating climate risk into financial supervision and reporting	Bangladesh, India, Sri Lanka
13.3.2: Number of countries that have communicated the strengthening of institutional, systemic, and individual capacity-building to implement adaptation, mitigation, and technology transfer	Supporting green refinancing schemes and capacity-building for banks in environmental risk assessment	Bangladesh, Pakistan, Sri Lanka
13.a.1: Mobilised climate finance (USD) to developing countries	Facilitation of green bonds, concessional loans, and targeted green sector lending	India, Bangladesh, Pakistan

Source: SDG Tracker Global, https://hlpf.un.org/tools/sdg-tracker  and websites of central banks.

SDG 17 (global partnership) and central banks

Are South Asian central banks proactive in participating in global partnerships that promote and support SDGs? One example that will be used is the participation of central banks from the South Asian region in the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), launched at the Paris One Planet Summit on 12th December 2017.[19] Bangladesh, India, and Pakistan are members of NGFS, but Nepal and Sri Lanka are not. SDG 17, which emphasises strengthening global partnerships to support the achievement of the Sustainable Development Goals, is particularly relevant for the financial sector. Central banks play a crucial role in fostering international collaboration, knowledge sharing, and capacity-building to address global challenges such as climate change and sustainable development. This section reflects the engagement of central banks in Bangladesh, India, Pakistan, Nepal, and Sri Lanka in global partnerships, with a focus on SDG 17 and related indicators.

As of 2025, Bangladesh, India, and Pakistan are full members of the NGFS, with Bangladesh Bank joining in 2021, Reserve Bank of India in 2019, and State Bank of Pakistan in 2021. Nepal and Sri Lanka have not yet joined the NGFS, indicating varying levels of engagement within the region. Beyond the NGFS, South Asian central banks have demonstrated participation in other international forums and partnerships. For instance, the Reserve Bank of India is an active member of the Sustainable Banking Network (SBN), a global community of financial sector regulatory agencies and banking associations committed to advancing sustainable finance. Bangladesh Bank has collaborated with the International Finance Corporation (IFC) and the United Nations Environment Programme (UNEP) on green banking guidelines and capacity-building initiatives. Pakistan’s central bank has engaged with the World Bank and the Asian Development Bank (ADB) on climate-resilient financial sector reforms.

The Reserve Bank of India and Bangladesh Bank reference global standards in sustainable finance reports, while Pakistan’s State Bank Outlines Green Banking Guidelines. As noted, Bangladesh, India, and Pakistan are committed NGFS members; Nepal and Sri Lanka, though not members, engage with other SDG initiatives such as Alliance for Financial Inclusion (AFI), showing diverse regional involvement in sustainable finance.[20]

Recommended actions to enhance the role of central banks in supporting SDGs

The following recommendations are proposed to empower central banks in South to play a more proactive and influential role in supporting the Sustainable Development Goals (SDGs) 5 (Gender Equality), 8 (Decent Work and Economic Growth), 13 (Climate Action), and 17 (Partnerships for the Goals). The following evidence-driven policy recommendations are proposed:

• Promote Gender-Inclusive Finance (SDG 5): Encourage the adoption of policies that advance women’s access to finance and leadership within the financial sector. Central banks should support gender-disaggregated data collection, incentivise lending to women entrepreneurs, and integrate gender considerations into supervisory frameworks and financial product development.
• Foster Sustainable Economic Growth and Job Creation (SDG 8): Prioritise policies that facilitate access to credit for small and medium-sized enterprises (SMEs), particularly those in green and innovation-driven sectors. Central banks can collaborate with commercial banks to develop targeted lending schemes, support financial literacy programs, and promote responsible banking practices that drive inclusive and sustainable economic growth. Central banks must connect with the ambitions of National Employment Policies (NEPs) and Active Labour Market Polices of the South Asian countries.
• Integrate Climate and Environmental Risks (SDG 13): Mandate the inclusion of climate-related and environmental risk assessments in supervisory frameworks. Central banks should strengthen capacity-building for financial institutions to identify, manage, and disclose climate risks, and encourage the development of green finance instruments such as green bonds and concessional loans to support climate resilience and low-carbon development.
• Strengthen Global and Regional Partnerships (SDG 17): Expand participation in international networks such as the NGFS and facilitate regular regional dialogues for peer learning. Central banks should deepen collaboration with international organisations, leverage technical assistance and funding, and align with global standards to accelerate progress in sustainable finance and SDG implementation.
• Enhance Data Collection and Reporting: Establish robust mechanisms for tracking and reporting on SDG-linked finance, including gender, employment, and climate-related indicators, to ensure transparency and inform evidence-based policy adjustments.
• Foster Innovation and Capacity-Building: Invest in training, research, and innovation hubs focused on sustainable banking, gender equality, climate risk assessment, and the development of new financial products aligned with SDGs.

About the authors

Mohd Avi Hossain

Mohammad Nazmul Avi Hossain is an Economist with extensive experience in the labour market, employment, trade, macroeconomic policies, and sustainable development. He is currently working on multiple assignments with UN agencies, academic and research institutes, including the United Nations Bangladesh Office as an Economist, UN Women as a Macroeconomist for Gender-Responsive Trade Policies, UNIDO as a Policy Expert, and Cornell University’s ILR School GLI as a project Labour Economist. He previously served as a Senior Programme Officer with the International Labour Organization (ILO) in Bangladesh and as an Employment Specialist and Economist (secondment) with the ILO in Fiji. Avi holds a Master’s in Applied Labour Economics from Università degli Studi di Torino and will begin a PhD in Economics at QUT in 2026 under the Australian Government’s RTP Scholarship.

Yan Islam

Professor Iyanatul (Yan) Islam is an Adjunct Professor at the Griffith Asia Institute, Distinguished Fellow, South Asian Network on Economic Modelling (SANEM), Dhaka, Bangladesh, and former Chief of the Employment and Labour Market Policies Branch at the ILO in Geneva. He was a Professor at Griffith University from 2003 to 2010, having joined in 1989. An international development economist, he studied at Manchester, Western Ontario, and Cambridge. Since the mid-1980s, he has worked with the ILO, UNDP, and ADB. Yan has authored over 100 publications and co-founded the Journal of Asia-Pacific Economy. He also serves on editorial boards for several academic journals.

Notes and references

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[1]      Subbarao, D (2025) CO25082 | India’s Path to Becoming a Developed Nation https://rsis.edu.sg/rsis-publication/rsis/indias-path-to-becoming-a-developed-nation/

[2]      Garriga, A. C. (2025). Revisiting Central Bank Independence in the World: An Extended Data Set. International Studies Quarterly, 69(2), sqaf024, https://doi.org/10.1093/isq/sqaf024

[3]      Blanchard, O., Romer, D., Spence, M., & Stiglitz, J. E. (Eds.). (2012). In the wake of the crisis: Leading economists reassess economic policy. MIT Press. https://direct.mit.edu/books/book/3357/In-the-Wake-of-the-CrisisLeading-Economists

[4]      Monnin, P., (2023). Monetary Policy and Sustainable Development Goals: What can central banks do? What should they do?. United Nations Department of Economic and Social Affairs.

[5]      Dikau, S., & Volz, U. (2021). Central bank mandates sustainability objectives and the promotion of green finance. Ecological Economics, 184, 107022.

[6]      Sustainable Development Report 2025 Financing Sustainable Development to 2030 and Mid-Century Includes the SDG Index and Dashboards, https://s3.amazonaws.com/sustainabledevelopment.report/2025/sustainable-development-report-2025.pdf

[7]      Sahay, R., Čihák, M., Diaye, P. N., Pena, D., Bi, R., Gao, Y., … & Yousefi, S. R. (2018). Women in finance: A case for closing gaps. International Monetary Fund.

[8]      IMF (2016). “Women in the Boardroom and Their Impact on Governance and Performance.” IMF Working Paper No. 16/50, International Monetary Fund.

[9]      Reuters, April 16, 2025

[10]     Bangladesh Bank Annual Report 2021. https://bdbl.portal.gov.bd/sites/default/files/files/bdbl.portal.gov.bd/page/623eb393_3124_4223_b5b5_364842c3e5c9/2022-08-29-06-52-f361a874b21d83677aea4fc61b155f12.pdf

[11]     Reserve Bank of India, https://static.pib.gov.in/WriteReadData/specificdocs/documents/2022/apr/doc20224535701.pdf

[12]     Asian Development Bank (2021). Asian Development Outlook 2021: Financing a Green and Inclusive Recovery. Manila: Asian Development Bank. https://www.adb.org/sites/default/files/publication/692111/ado2021.pdf?__cf_chl_tk=M1HvXmProEQKEqn1rOpxV5_3Tc6h6OjQgGUVq0768tQ-1764387463-1.0.1.1-LsN3.cn2akbVitBT8OtWtx33YM2DaB9_vcajGbkMCYk

[13]     Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The Global Findex Database 2017: Measuring financial inclusion and the fintech revolution. World Bank.

[14]     Asian Development Bank (2021). Asian Development Outlook 2021: Financing a Green and Inclusive Recovery. Manila: Asian Development Bank. https://www.adb.org/sites/default/files/publication/692111/ado2021.pdf?__cf_chl_tk=M1HvXmProEQKEqn1rOpxV5_3Tc6h6OjQgGUVq0768tQ-1764387463-1.0.1.1-LsN3.cn2akbVitBT8OtWtx33YM2DaB9_vcajGbkMCYk

[15]     International Monetary Fund. (2020). The Promise of Fintech: Financial Inclusion in the Post COVID-19 Era. Washington, DC: IMF. https://www.imf.org/en/publications/departmental-papers-policy-papers/issues/2020/06/29/the-promise-of-fintech-financial-inclusion-in-the-post-covid-19-era-48623

[16]     Yale University (2024). Environmental Performance Index. https://epi.yale.edu/measure/2024/EPI

[17]     Rahman, M., & Islam, S. (2024). Sustainable finance policy and green sector lending in Bangladesh: Progress and challenges. Journal of Environmental Finance and Policy, 18(2), 123–139.

[18]     Perera, S. (2024). Sustainable banking practices and the development of a green asset taxonomy in Sri Lanka. Journal of Environmental Finance and Policy, 18(3), 210–227.

[19]     Welcome to the NGFS website | Network for Greening the Financial System

[20]     Alliance for Financial Inclusion – Bringing smart policies to life