With rising electricity costs and an increased push for decarbonization, banks across India are strengthening their green lending portfolios to support the installation of captive and rooftop solar systems.

At the recent Mercom India C&I Clean Energy Meet in Coimbatore, leading bankers outlined how they are adapting loan products, processes, and terms to meet the evolving energy needs of micro, small, and medium enterprises (MSMEs).

Representatives from the Small Industries Development Bank of India (SIDBI), State Bank of India (SBI), IDBI Bank, and Bank of Maharashtra shared details about their green financing strategies.

Financing Options

R. Paramasivam, Assistant General Manager, SIDBI, stated that his organization offers term loans covering up to 80% of the project cost for ground-mounted and rooftop solar installations. Collateral is not required for rooftop solar systems; instead, the margin necessary is converted into a fixed deposit and held as security.

SIDBI also supports greenfield projects and third-party power purchase agreements (PPAs), including those from developers with no prior experience in the sector.

“We even finance projects above ₹100 million (~$1.15 million), subject to a detailed techno-economic viability study,” Paramasivam added. Applications and documentation can be filed online, with a processing time of around 15 days.

Sankara Subramanian V, AGM, SBI, stated that the bank offers similar flexibility, especially for larger group captive solar projects. “For rooftop solar, the margin requirement is as low as 20% (financing), and we go up to ₹1.5 billion (~$17.29 million) for spinning mills. Our interest rates range from 8.6% to 9.7% based on internal and external credit ratings. We do not require collateral for solar systems.”

Subramanian stated that group captive solar projects with a value below ₹500 million (~$5.76 million) require a 28% margin, while those exceeding this amount require a 30% margin. The borrowers must have a rating of at least BBB, meaning they have positive ongoing viability prospects. SBI employs a committee-based approach for approvals and requires a signed PPA and viability study before disbursing funds.

IDBI takes a more conservative stance. “We do not have standalone green energy products for commercial and industrial (C&I) yet, but we fund captive solar projects by combining them with existing commercial or home loans,” said Purushotham A P, AGM, Assets, IDBI Bank. The bank calculates eligibility based on the borrower’s existing credit profile and offers interest rates ranging from 8.45% to 9.5%.

Bank of Maharashtra offers green energy finance to a diverse range of customer groups, including MSMEs, agricultural customers, and homeowners. “We finance rooftop solar systems under the PM Surya Ghar Yojana at rates starting from 7.35%,” said SN Balaji, AGM, Bank of Maharashtra. MSMEs can access loans from the bank with tenures ranging from seven to 15 years and interest rates varying from 8.5% to 11%, depending on the borrower’s profile.

RBI’s Rate Cut Impact on Green Lending

Speakers at the meeting agreed that the Reserve Bank of India’s (RBI) recent announcement of a repo rate cut and a reduction in the cash reserve ratio (CRR) has created a favorable lending environment.

Paramasivam emphasized that while the CRR cut does not directly impact SIDBI, the repo-linked rate reduction will bring interest rates even lower. “Our current rates start at 8.45%, and we expect this to reduce further.”

Subramaniam confirmed a similar case for SBI. “Our rates are reset on the 15^th of every month, and a downward revision is expected.”

acknowledged that repo-linked lending rates are now leading to increased affordability. “Even though we do not yet have standalone green energy products, banks are now seeing increased interest from MSMEs and larger corporates,” he said.

Balaji observed that the timing of the RBI’s decision was strategically aligned with market needs. “This (decision) comes at the start of the festive and high-consumption seasons. Additional liquidity from the CRR cut will help banks be more aggressive in lending,” he said.

“A borrower who previously qualified for ₹3 million (~$34,581.93) might now get ₹3.3 million (~$38,040.12). This increased credit availability makes rooftop solar more viable for homeowners and small businesses,” added Balaji.

Repayment Terms and Pre-Closure Penalties

SIDBI charges penalties only if a borrower closes the loan early due to refinancing with another lender. “If the customer faces genuine business stress, we waive repayment charges,” said Paramasivam.

SBI does not levy any repayment charges for MSME borrowers. Subramaniam stated, “For captive consumers, solar is now mandatory. You are behind schedule if you have not switched. Hedging 80% to 95% of your power through solar can protect you from inflation and future tariff hikes.”

Purushotham stated that MSMEs are typically exempt from pre-closure penalties, particularly for term loans and working capital.

Balaji noted that while corporate borrowers may incur some prepayment charges due to the capital costs involved, the broader benefits of switching to solar energy far outweigh the costs. “India is geographically well-positioned to benefit from solar energy. Its adoption is not just about economics but also about national energy security,” he concluded.

Advice for C&I Units 

All speakers encouraged C&I consumers to switch to solar energy, particularly given the decreasing interest rates and streamlined banking processes.

Subramaniam stated, “If you have not moved to solar yet, you are already late. Equity is expensive, and the cost of not adopting solar is only going to rise. Banks like ours are ready to back you if your PPAs and cash flows are in place.”

Purushotham said that demand is rising, and banks are ready to meet it.

Balaji urged businesses to act quickly. “Solar is no longer optional; it is a strategic necessity. With lower borrowing costs, favorable policies, and rising electricity rates, now is the time.”

The speakers emphasized that, with digital lending platforms, interest rates trending downward, and dedicated green energy funding options becoming more mainstream, the transition to solar has never been more accessible.

Mercom India will host its next ‘C&I Clean Energy Meet’ in Hyderabad on August 22, 2025.

Mercom India will also be hosting the fifth edition of its Renewables Summit 2025 on July 24-25, 2025, at the Hyatt Residency, New Delhi. This event brings together all the stakeholders who are shaping India’s renewable energy industry.

You can register for the Summit here.