As businesses increasingly transition toward clean energy, financing options for solar projects have become a crucial discussion topic. At the recent C&I Clean Energy Meet hosted by Mercom in Chennai, industry experts from leading financial institutions discussed multiple lending options, loan structures, and interest rates available for businesses investing in solar energy.

Several financial institutions, including the Small Industries Development Bank of India (SIDBI), IDBI Bank, and the Bank of Maharashtra, outlined their diverse lending products tailored for solar and other renewable energy initiatives at the event.

Anburaj C, Deputy General Manager, SIDBI, explained that SIDBI offers loans to micro, small, and medium enterprises (MSMEs) with minimal documentation requirements. Using digital processing, borrowers with a three-year balance sheet can avail of loans up to ₹20 million (~$229,301) within 30 minutes. “Loans exceeding this amount follow a slightly extended but simple approval process, typically completed within seven to ten days. Approvals for smaller loans up to ₹3 lakh (~$3,439) can be completed at the branch level in four days,” he said.

Chandramohan S, Assistant General Manager, IDBI Bank, highlighted that IDBI has financed project-based green energy initiatives, including large-scale solar projects. Recently, IDBI extended ₹1.5 billion (~$17.19 million) to a corporate entity for a clean energy project.

S. Sridhar, Chief Manager at the Bank of Maharashtra noted the bank finances rooftop solar installations and offers specialized loan products for MSMEs, solar engineering, procurement, construction companies, and manufacturers. The bank’s Mahaswagatham program provides loans ranging from ₹50 million (~$573,252) to ₹100 million (~$1.14 million) at competitive interest rates.

Interest rates for solar financing are becoming increasingly competitive to make green investments more viable for businesses. Bank of Maharashtra offers interest rates starting at 6.8% for loans up to ₹300,000 (~$3,439) for 3 kW projects and 10.05% for loans above ₹300,000 (~$3,439).

SIDBI offers an interest rate reduction of 25 basis points for green energy projects, bringing their standard rates to between 8.7% and 9.4%. Government subsidies play a significant role in reducing borrowing costs for green energy projects. SIDBI’s Green Investment and Financing for Transformation (GIFT) program provides a 2% interest subvention for micro and small enterprises investing in rooftop solar to reduce interest rates further. This subvention applies to investments of up to ₹20 million (~$229,301) to make financing more attractive for small businesses.

IDBI Bank’s interest rates range from 8.5% to 10%, depending on internal and external credit ratings. IDBI follows internal credit ratings for loans below ₹250 million (~$2.86 million), while loans above this amount require an external credit rating with a minimum threshold of BBB (lower-medium-grade credit rating).

SIDBI is also a nodal agency for the Tamil Nadu Government’s interest subvention program, which provides back-ended interest subsidies for businesses investing in energy-efficient machinery.

Banks have streamlined their loan processing systems, making them faster and more accessible. SIDBI operates a fully digital, end-to-end loan process, enabling MSMEs to apply online and receive sanctions without visiting a branch. Bank of Maharashtra allows customers to apply via government portals such as Surya Ghar and Jan Samarth, reducing approval times to a minimum of seven days for rooftop solar financing.

IDBI Bank follows a similar process but with a turnaround of fifteen days for corporate loans due to additional due diligence requirements. IDBI and other banks conduct thorough credit evaluations, with due diligence reports and financial scoring playing a critical role in determining eligibility and interest rates. While SIDBI does not require a project report for existing companies, larger projects may require a techno-economic viability report to assess financial feasibility.

Collateral-free loans are now available through various government and bank-backed programs. SIDBI provides collateral-free loans up to ₹100 million (~$1.14 million) under the Credit Guarantee Program. Its Mutual Credit Guarantee Program extends collateral-free lending up to ₹1 billion (~$11.46 million).

Credit rating considerations vary across institutions. Bank of Maharashtra relies on the Credit Information Bureau of India (CIBIL) scores, with a minimum threshold of 680. However, loans below this score are assessed on a case-by-case basis. IDBI Bank requires an external credit rating for loans above ₹250 million (~$2.86 million), while loans below this amount follow internal rating parameters. SIDBI does not require external ratings but evaluates management strength, financial health, and industry factors for risk assessment.

Experts at the event strongly encouraged businesses to invest in solar energy to reduce operating costs. Many industries, especially in power-intensive sectors such as textiles, have successfully lowered operating expenses by transitioning to solar. Chandramohan shared an example of a textile company that had previously invested in wind energy but recently installed rooftop solar for its captive consumption to further reduce energy expenses. The company’s management recognized that profit margins were shrinking due to rising raw material costs, making solar a strategic move to cut operating expenses.

Experts also advised businesses to approach banks directly rather than relying on intermediaries to ensure transparency and avoid unnecessary costs. They warned that intermediaries could increase costs and delay financing, making it more beneficial for businesses to apply directly through digital platforms or visit bank branches for assistance. Bank of Maharashtra has 2,500 branches across India, allowing for faster approvals at the local level, with some loans being sanctioned at the branch manager’s discretion.

The discussions underscored how financial institutions increasingly prioritize clean energy investments, making funding more accessible for businesses. With low interest rates, government-backed subsidies, and streamlined digital processing, there has never been a better time for MSMEs and corporates to invest in solar energy. By adopting solar power, businesses can cut electricity costs and benefit from going green.

The next Mercom India C&I Clean Energy Meet event will be held in Mumbai on April 17, 2025.

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