India’s clean energy transition is gaining momentum, driven by growing policy support and rising pressure on commercial and industrial (C&I) consumers to reduce electricity costs and reliance on grid supply. In this environment, rooftop and captive solar systems are increasingly being viewed as viable alternatives for meeting energy needs.

However, financing remains a critical determinant of solar adoption, particularly for residential and C&I projects. Recognizing this, public and private sector banks, along with non-banking financial institutions, are stepping up efforts to support the transition through expanded green financing initiatives. These institutions are rolling out tailored financial products for residential customers, micro, small, and medium enterprises (MSMEs), large corporates, EPC service providers, and the domestic solar manufacturing ecosystem.

Financing options

Consumers planning to install solar projects can access a range of financing products from banks and other lending institutions. These include structured funding options, from MSME-focused bank loans to lease-based arrangements and turnkey financing solutions, enabling different customer segments to adopt solar with lower upfront costs.

Priyanka Gaikwad, Deputy General Manager at Small Industries Development Bank of India (SIDBI), a principal institution for promoting, financing, and developing the MSME sector in India, said the institution offers multiple green financing options. There are three noteworthy sustainable financing variants tailored to the type of investment and the customer category.

The first is the Electronics and Green Products Scheme (eGPS), which encourages MSMEs to adopt responsible sourcing and reduce carbon footprints. Under this program, loans up to ₹50 million (~$558,126) are available. The online loan applications are fully automated to analyze and evaluate applications and generate in-principal approval within an hour.

The End-to-End Energy Efficiency (4E) financing caters to mid-sized projects and provides loans of up to ₹150 million (~$1.67 million), subject to a maximum promoter contribution of 75% of the project cost. MSMEs can access loans to implement energy conservation measures, upgrade technology, and invest in rooftop solar.

The eGPS and 4E programs apply to existing entities of at least three years and satisfactory financials.

Projects that do not qualify under these variants are covered under the green financing program. This program covers greenfield and major expansion projects with project costs exceeding ₹150 million (~$1.67 million).

Recently, SIDBI contracted a $200 million line of credit under the Green Climate Fund’s Financing Mitigation and Adaptation Projects (FMAP) program. This includes concessional financing options for solar projects up to 10 MW and wind projects up to 5 MW.

Kuldeep Kishore, AGM at the Bank of India, stated that the bank offers loans under three programs.

The first is the Energy Saver program, aimed at industries looking to reduce electricity costs by adopting green energy solutions, particularly solar installations. Under the program, the bank provides loans at lower-than-average margins for manufacturing and service units, with borrower margins starting as low as 10% and competitive interest rates.

Under the Energy Saver vendor finance program, Bank of India provides channel financing through approved cash credit facilities, financing stocks, and book debts. This financing can be used to purchase solar panels from the original equipment manufacturers.

The third program covers project finance for Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM KUSUM) Component-C. At the district level, the bank can approve ₹350 million (~$3.9 million), rising to ₹700 million (~$7.81 million) without prior approval (from the head office or central office).

“We have remained cautious, as well as neutral, in terms of the project being feasible and profitable,” said Kishore.

Lending Criteria

Banks and financial institutions rely significantly on lending criteria to assess the risks and mitigate them while determining a borrower’s loan repayment ability.

Institutions such as SIDBI analyze parameters such as energy savings and greenhouse gas emissions reductions when considering loan proposals. They also undertake environmental and social due diligence.

Lenders consider credit ratings when making informed decisions and managing their risk exposure. Credit ratings act as an independent, third-party assessment of a borrower’s creditworthiness and their likelihood of default.

About the relevance of credit ratings while considering loan proposals, Gaikwad said, “The RBI mandates that each and every proposal must be rated. Pricing (interest rates) is based on the credit rating. So ultimately, your pricing, eligibility, and all other criteria are dependent on these ratings.”

She added that applicants must provide their basic details, following which, SIDBI will determine which programs their projects fall under and the applicable incentives and credit ratings. This will be decided at the branch level.

The system for ascertaining loan eligibility has become more rigid than before because applications are now online. This leaves little room for discretion while approving the applications. Gaikwad advises financial discipline for better chances at loan approvals.

“Many times, we use credit and risk assessment tools, such as CIBIL, CMR, FIT Rank, and even Jocata SWARA scores, which directly capture information from the available public data. Financial discipline will help maintain good scores,” she said.

Bank of India considers each project’s financials and its cost-benefit analysis before approving loans.

According to Kishore, it is easier to project costs, profits, and incomes, as well as variables, in the solar sector. Financial modeling uncertainty is very low in this sector.

Applicants who maintain good financial conduct over the initial three to five years build considerable trust. This will lead banks, specifically public sector undertakings, to provide greater support to borrowers even in tough or experimental periods.

Applicants should also keep their financial projections as certain as possible while discussing their applications with the banks.

Interest Rates

Lenders are also offering attractive interest rates to help drive solar installations. Low interest rates will help reduce borrowing costs and cut monthly payments. This will free up the borrower’s cash flow for their investment or operational needs.

Government organisations such as the MSME Ministry offer incentives under the Green Investment and Financing for Transformation to help smaller businesses. The program, specifically applicable to micro or small enterprises, provides an interest subvention of 2% to projects costing up to ₹20 million (~$223,250.40).

Gaikwad said SIDBI has been providing concessional financing for some time. The institution usually provides concessions of up to 25 basis points compared to normal project sizes. Additionally, any proposals that qualify under the FMAP program can receive concessions.

Bank of India’s interest rates can go as low as the repo-based lending rate of approximately 8.5%. The remaining rates depend on the credit rating models, the type of financing chosen, the type of activity or projects the applicants are involved in, and the project’s longevity, among other factors.

“If you are in business for the past three to five years with a good or excellent credit rating, you could go as low as 8% (interest rate), and if you are a new entrant, it could go as high as somewhere between 10% and 11%,” said Kishore.

Benefits of Competition and Incentive Awareness

With the growing transition to renewable energy solutions in India, many companies have entered the fray to offer a range of solutions.

Kishore noted that increasing competition helps clean technology become more refined. It is easier to understand and to grow.

“It is an avenue with less uncertainty and more promise,” he said.

Despite the rising adoption of solar energy and other clean energy systems in India, awareness regarding their benefits remains fairly low within the country.

Gaikwad observed a similar lack of awareness of available incentives and subsidies. She advises customers to contact their bankers and institutions, such as SIDBI, for more information about these initiatives.

The industry discussion at Mercom’s recent C&I Clean Energy Meet in Nagpur highlighted the diverse options available for solar and other clean energy projects. Clean energy financing is evolving alongside India’s energy landscape, making it easier to finance renewable energy projects.

While discussing financing options, speakers underscored the importance of creditworthiness and financial discipline in securing loans for clean energy projects. They also emphasized the need to raise awareness of loan options and encouraged potential customers to connect with banks and other lending institutions for more information.

The next Mercom India C&I Clean Energy Meet event will be held in Nashik on January 9, 2026.

Contact us if you plan to install solar and need guidance or vendor recommendations.