Commercial and industrial (C&I) units investing in renewable energy projects have access to a growing range of bank financing options, including green loans with concessional interest rates, longer repayment periods, and collateral-free funding for eligible borrowers.

Banking industry representatives said that the access to favorable financing depends on a business’s financial track record, project cash flows, promoter credibility, and realistic implementation timelines.

Green Financing Options

Kameshwar Rao, AGM at Small Industries Development Bank of India (SIDBI), said the bank has dedicated products for clean energy and sustainability projects, including rooftop solar, energy efficient equipment, and waste management projects.

SIDBI provides collateral-free financing of up to ₹150 million (~$1.56 million) under one of its financing products for brownfield projects. Eligible borrowers must have been operating for at least three years and demonstrate cash profits, Goods and Services Tax (GST) compliance, and a steady loan repayment track record. Financing above ₹150 million (~$1.56 million) may require collateral depending on the borrower’s financial and other parameters.

The repayment period can extend up to 10 years, including a moratorium of up to 18 months.

Rao said interest rates are determined through an internal rating system that considers borrower, project, and market-specific factors. GST compliance, statutory obligations, and previous repayment records are also considered while determining rates.

For qualifying brownfield proposals of up to ₹150 million, SIDBI can complete the approval process within five working days, provided borrowers meet the specified parameters. The documentation process can also be completed digitally.

M Phanindra, Chief Manager & Branch Head at Bank of Maharashtra, said the bank offers multiple financing options for renewable energy projects. Lending terms depend on the borrower’s internal credit rating, collateral availability, and repayment history.

The bank can structure loans using a combination of collateral and Credit Guarantee Fund Trust for Micro, Small and Medium Enterprises (MSMEs) guarantee cover, depending on its assessment of the borrower. For borrowers with stronger internal ratings, the bank can finance up to 80% of the project cost, with the borrower contributing the remaining 20%.

Proposals above ₹100 million (~$1.04 million) may also qualify for MSME financing, subject to the applicable turnover and investment criteria. Equipment finance can cover eligible requirements, including machinery and project installation.

For MSMEs, green financing rates depend on the borrower’s CIBIL MSME Rank (CMR) and collateral support. Phanindra said rates for a CMR-1 borrower can start at around 8.35% with collateral and around 8.9% without collateral, while rates for lower-rated borrowers can reach about 13.35%.

Financial Discipline

Bank executives emphasized the importance of accurate financial and GST records, which give lenders greater visibility into a borrower’s transactions and financial position. Banks assess turnover, repayment history, existing banking relationships, and other financial parameters when evaluating proposals.

Phanindra noted lenders also assess the promoter’s ability and commitment to execute the project, along with the selection of credible vendors.

A strong financial track record alone may therefore not be sufficient. Vendor selection and the promoter’s ability to execute the project on schedule can also influence financing decisions.

Project Timelines

Rao identified delays in obtaining project approvals as a major challenge for solar project developers and their lenders.

Developers may initially expect projects to be implemented within six to eight months but subsequently seek extensions to the moratorium when approvals are delayed. Such extensions can create challenges for lenders because they are subject to regulatory requirements and may affect loan classification.

Rao recommended developers factor potential approval delays into implementation schedules rather than base financing plans on aggressive commissioning assumptions. More realistic timelines can help align project cash flows with repayment obligations.

Rao also cautioned businesses against developing renewable energy projects solely to access government incentives, emphasizing that the underlying investment must remain commercially viable.

“It is an investment. It is not an expense,” he said, adding that renewable energy projects can generate savings and improve cash flows.

Banks can also provide for some execution uncertainty while structuring loans. Rao said lenders may include contingencies of around 10% to help promoters manage unexpected costs or project delays.

These insights were shared by speakers during a session ‘Attractive Financing Options: Easy and Affordable Loans’ at Mercom India’s C&I Clean Energy Meet held in Visakhapatnam recently.

Mercom India hosts C&I Clean Energy events in different cities across India to help businesses understand and address challenges associated with renewable energy adoption, including technology selection, financing, project economics, and execution. The next C&I event will be held in Lucknow on October 9, 2026.