The State Bank of India (SBI), one of India’s largest public sector banks, declared results for the financial year (FY) 2020-2021, which claimed that the bank had approved over ₹319.18 billion (~$4.26 billion) in renewable energy project finance in India as of March 2021.
The bank has introduced ‘Renewable Energy Policy’, incorporating various segments such as ground-mounted solar power, wind energy, grid-connected rooftop solar power, small hydro (up to 25 MW), and waste-to-energy. According to the bank, it had financed 752 renewable energy projects with a total installed capacity of 13,801.7 MW until March 31, 2021.
The financing includes ₹185.65 billion (~$2.48 billion) for solar photovoltaic (PV) ground-mounted projects; ₹18.64 billion (~$249.21 million) for rooftop solar projects; ₹91.37 billion (~$1.22 billion) for wind energy; ₹20.93 billion (~$279.8 million) for small hydro projects; ₹1.65 billion (~$22.05 million) for biomass projects; and ₹940 million (~$12.56 million) for waste-to-energy projects.
Some of SBI’s renewable finance programs:
- The grid-connected rooftop solar PV projects program funds small projects with a capacity of up to 1 MW to popularize the use of renewable energy among commercial and industrial (C&I) entities with smaller roofs; ₹6.88 billion (~$91.94 million) has been approved under this program.
- The financing solar photovoltaic pump sets initiative helps farmers fund their purchases while also reducing the environmental footprint.
- Under the e-rickshaw program, SBI allocated ₹142.1 million (~$1.89 million) towards e-rickshaws as of March 31, 2021.
According to the Chairman of SBI, Dinesh Khara, the bank has also signed a memorandum of understanding with the Luxembourg Stock Exchange to boost the environmental, social, and governance (ESG)-focused funds and bonds market.
The bank received an ‘A’ rating from the Morgan Stanley Capital International ESG Ratings in December 2020, a significant improvement considering it was rated ‘BB’ in September 2020. The bank also raised green bonds worth ~$800 million since FY 2018-19 and a ‘green loan’ worth €50 million (~$59.18 million) in FY 2020-21.
SBI has also partnered with several international banks and funding agencies to amplify its responsible investment activities. These institutions provide lines of credit, which the bank uses to fund projects with positive environmental and social impacts.
Some of the existing lines of credit are:
- $625 million from World Bank: Signed in 2016, this line of credit aims to enhance clean energy generation in India. Loans are extended to install rooftop solar panels to enable consumers to meet their energy needs sustainably.
- $300 million from KfW German Development Bank: Since its signing in 2015, this line has allowed SBI to extend credit to agriculture and allied activities, small businesses, small-scale industries, and renewable energy, among others.
- $277 million from KfW German Development Bank: Incentivising builders and home loan borrowers to opt for energy-efficient alternatives.
- $177.3 million from KfW German Development Bank: This line of credit extended in 2018 aims to boost renewable energy in India. It aims to build on the reach and expertise of the Indo-German Solar Energy Partnership to provide funding to renewable energy projects, aiding the fight against climate change.
- $214.3 million from European Investment Bank (EIB): The EIB extended this line of credit to SBI in 2017 to reduce reliance on fossil fuels. Since then, it is being used to fund large greenfield solar energy projects in India, progressing towards the National Solar Mission.
In May this year, EIB and the SBI launched a new initiative of €100 million (~$121.63 million) for climate action and sustainability financing. Further, in conjunction with the World Bank, SBI has trained 350 employees on handling solar project proposals so far.
SBI has also acknowledged the increasing risks of climate change embedded in its credit asset portfolio and initiated the process of formulating a framework for climate risk management to mitigate the crisis.
Additionally, SBI is also developing a framework for identifying and managing risks arising out of ESG practices. The bank is developing a structure for integrating ESG risk assessment in overall credit risk assessment, which is being reviewed to assess its feasibility.
In a webinar held in April 2021 by Mercom on project finance, Hitesh Paliwal, Senior Vice President & Zonal Head, North Zone, Corporate Banking Group, SBI, said that for the last few years, the bank has been seeing 6-10 GW in capacity addition in the Indian renewable sphere annually. The overall composition of SBI’s power assets was to the tune of ₹3 trillion (~$39.78 billion), whereas renewable composition in India’s power mix was around 11%, Paliwal had noted.
Image credit: Digamber, CC0, via Wikimedia Commons
Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.