Commercial and industrial (C&I) consumers are increasingly evaluating rooftop solar and open access power purchase agreements as cost-effective solutions for reducing electricity expenses and meeting sustainability goals. However, one of the key challenges for individuals and businesses is access to affordable financing.

At Mercom India’s C&I Clean Energy Meet in Hyderabad, representatives from banks and non-banking financial companies presented detailed insights into green financing products available in the market. The panelists were B. Swaroopa, Assistant General Manager at the Small Industries Development Bank of India (SIDBI), K. Prabhudasu, Chief Manager at Bank of Maharashtra, and Piyush Bang, Chief Manager at Credit Fair.

The panel discussion focused on loan products, interest rates, credit rating requirements, collateral terms, and the evolving demand for rooftop and open access projects from C&I units.

Green Financing Products

SIDBI has developed specialized loan products to encourage micro, small, and medium enterprises (MSMEs) to adopt green energy solutions. Under the Green Financing Program, financing is available for existing units that invest in energy-efficient equipment, rooftop solar, ground-mounted solar projects, waste treatment, recycling, and other carbon-reduction activities.

SIDBI provides these loans at concessional interest rates and reduced processing fees. The base lending rate is linked to the marginal cost of lending rate (MCLR), starting from 8.35%, with variations depending on the internal and external credit rating of the borrower.

“For green financing cases, we give concessions up to 0.25% to 2.5%,” said Swaroopa. The rate can go up to 11.15% depending on the risk profile. Collateral requirements are flexible.

The collateral amount is treated as a fixed deposit with SIDBI, which accrues interest and is returned to the borrower once the loan is fully repaid. “It is just like a security deposit on which you also earn interest,” explained Swaroopa.

On pre-closure, SIDBI does levy penalties, as funds are raised from markets and invested in long- and short-term instruments.

Maha Finance and Surya Ghar Yojana

The Bank of Maharashtra has introduced one specific program, the Maha Finance, which covers all commercial units engaged in MSME activities.

Under this program, loans of up to ₹100 million (~$1.13 million) are provided to MSMEs for green projects. The interest rate starts from 9.5%, depending on the borrower’s commercial credit rating. For individual consumers, the bank provides loans of up to ₹1 million (~$11,300) at rates starting from 7% for rooftop solar projects under the PM Surya Ghar: Muft Bijli Yojana.

Borrowers are eligible regardless of availing the government subsidy of approximately ₹78,000 (~$881). Borrowers must first approach an empaneled vendor and provide the project cost details. The bank finances up to 70% of the project cost, with interest rates determined by commercial credit rating.

Borrowers with commercial credit ratings between 1 and 6 are eligible, and those with lower ratings are considered on a case-by-case basis with head office approval. Importantly, the Bank of Maharashtra does not levy any foreclosure charges.

Borrowers rated C1 are eligible for the lowest rates at 8.35%. At Bank of Maharashtra, consumer loans are assessed based on CIBIL ratings, while commercial loans are graded according to CIBIL MSME Rankings (CMR).

Flexible Terms for Underserved Segments

NBFC Credit Fair lends to businesses that larger banks often underserve.

Credit Fair typically provides loans ranging from ₹200,000 (~$2,260) to ₹5 million (~$56,500), extending up to ₹10 million (~$113,000) in select cases. The company focuses on rapid loan approvals, minimal documentation, and flexible eligibility norms.

Loans are approved even for borrowers with credit scores as low as 625 or those with no prior loan history. To date, Credit Fair has financed over 14,000 projects, with 30% of these coming from the C&I segment. The main customer base includes mid-sized commercial units such as hospitals, petrol pumps, restaurants, and schools.

The NBFC also finances off-grid systems, particularly for schools that operate during the day. Interest rates at Credit Fair start from 8–9% flat, translating to around 16% on a reducing balance basis. The loan tenure ranges from six months to five years, aligning with the breakeven period of most solar projects.

“We have seen a breakeven period for solar installations of four or five years with accelerated depreciation and other benefits,” said Bang. Credit Fair uses an internal assessment model that incorporates the expected savings from solar into income calculations, making it easier for companies to qualify.

SIDBI uses both internal credit ratings and external ratings from the Reserve Bank of India (RBI)-recognized agencies.

Ratings from 1 to 6 qualify for attractive financing terms. Credit Fair relies largely on internal assessments and project viability rather than traditional credit history. This includes evaluating solar savings as part of income.

The session also discussed that despite policy support and attractive financing, commercial adoption remains limited compared to residential units. “Even today, the maximum installations that are happening are coming from residential at 77%, 6-7% from commercial, and industrial 12-13%,” said Bang.

Credit Fair has observed demand from restaurants, hotels, hospitals, schools, and small manufacturing units, such as pharmaceutical and dairy companies. However, lack of awareness remains a barrier.

Policy and Regulatory Support

The panel also examined how recent regulatory moves affect green financing. For example, the RBI’s announcement of a 100 basis point reduction in the cash reserve ratio (CRR) was expected to improve lending capacity.

While CRR does not apply directly to SIDBI, Swaroopa explained the implications for commercial banks. “When the ratio is decreased, the banks get more money to lend, and there is less dependency on deposits. More money means they can reduce the interest rates, which are passed on to the customer.”

However, she also noted that a lower CRR could result in slightly lower deposit interest rates, which would impact savings.

The next Mercom India C&I Clean Energy Meet event will be held in Jaipur on September 19, 2025.

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