Those who are engaged in financial sectors have realized that climate change is the biggest risk faced by the world. To tackle it, they’ve started to focus on a new emerging policy known as green finance which concentrates on financing projects which are environmentally sustainable. Although it is gaining some momentum, there is still no universally agreed-upon definition of green finance, not even in India. Government of India has increased its focus on green finance by introducing schemes which promote green finance in different sectors such as electric vehicles, priority sector lending scheme etc. However, there exists large number of barriers in the development of green finance which should be resolved as soon as possible. The challenges include lack of a clear definition, inability to internalize the externalities, maturity mismatch, poor institutional framework etc. The author in this article focuses mainly on the challenges of green finance and put forward some recommendations.