Scheduled Banks’ Loans to Renewable Projects Up 113% in April-Nov Period

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The loans to the renewable energy projects disbursed by the scheduled commercial banks stood at ₹41.77 billion (~$507.19 million) as of November 2022.  This is a 113% year-over-year jump in comparison to ₹19.61 billion (~$238.11 million), according to  Reserve Bank of India (RBI) data.

The jump is much higher than the 17% YoY rise in the deployment of gross bank credit to renewables in the April-November period of 2021.

Renewables were added to priority sector lending in 2015. Sectors in the priority list find it easier to access bank credit at lower interest rates.

There has been increased interest among banks to lend to the renewables sector in recent years, primarily due government’s push for a green transition with an emphasis on solar, wind, and other renewable energy sources.

Moreover, the renewable purchase obligations for power distribution companies and an increasing number of commercial and industrial units opting for green power have made lending to these projects profitable propositions for banks.

Abhishek Kumar, Deputy General Manager, SIDBI, said the bank has set an ambitious target of disbursing loans for 1,000 MW of solar by March 2023.

“There has been an increase in lending to renewables, especially from the rooftop industry in states like Rajasthan, Gujarat, and Maharashtra,” Kumar said. “There are a lot of existing manufacturers who are expanding their production lines, and this is where we see an increased interest from.”

“We disburse loans ranging from ₹2.5 million (~$30,351) to ₹150 million (~$1.82 million). However, most of the loans are in the ₹2.5 million (~$30,351) to ₹50 million (~$6,07,032) range. The interest rates are 7.4 to 7.7%, which was even lower before the latest repo rate revision by the RBI. For borrowers with robust credit ratings, the interest rate is closer to the lower end of the range.”

Loans up to ₹300 million (~$3.64 million) to generators of solar, biomass, wind, and micro-hydel power are covered under RBI’s priority sector lending guidelines.

Public utilities based on non-conventional power sources like street lighting systems and remote village electrification are also eligible for priority sector classification. For individual household rooftop systems, the limit is ₹1 million (~$12,144) per borrower.

Last year, government think tank Niti Aayog proposed the inclusion of electric vehicles in RBI’s priority-sector lending guidelines to help enhance the sector’s financing market in India.

Mercom India will host the ‘C&I Clean Energy Meet’ series across major cities in the country in 2023 to bring the units in the commercial and industrial segment face-to-face with green energy developers and financiers specializing in designing, implementing, and funding renewable energy solutions for businesses.