The Reserve Bank of India’s (RBI) recent decision to cut interest rates by 50 basis points has brought cheer to the renewable energy sector, with stakeholders describing the announcement as a significant tailwind.

Industry insiders said the rate cut, the third since the year began, has the potential to reduce the borrowing costs for renewable energy projects.

Besides the repo rate cut, the 100 basis-point reduction in the Cash Reserve Ratio (CRR) will unlock ₹2.5 trillion (~$29.1 billion) for onward lending by banks.

Stakeholders said the rate cut will mean more liquidity will get injected into the system, which is already conducive to renewable energy development. More investments are likely to flow into the renewable energy space, which is a priority sector for bank lending.

Earlier this year, the RBI increased the lending limit for the renewable energy sector, effective from April 1, under new guidelines. It increased the limit of bank loans to ₹350 million (~$4.08 million) for renewable energy-based generators.

“The latent demand for renewable energy products, components, and services will translate into actual demand. Production Linked Incentive program-linked manufacturing will receive a big boost,” said the CEO of a solar cell and module manufacturer.

He added, “This means lenders to renewable energy companies like IREDA and PFC can lend more to clean energy projects.”

Unlike a repo rate cut, a CRR reduction can quickly increase bank liquidity. Several banks have already cut their lending rates, aligning with the central bank’s monetary policy committee decision. While banks will continue to exercise the same level of due diligence when approving loans, the time required for disbursement is likely to decrease.

Abani Jha, CFO of Saatvik Green Energy, said the RBI’s 50 basis-point repo rate cut signals a strong intent to bolster economic growth and investment. “For the capital-intensive renewable energy sector, and particularly the solar industry, this reduction in borrowing costs translates into more affordable project financing, enhancing the viability and attractiveness of new solar power installations and manufacturing ventures across the value chain.”

The interest rate cut is expected to have a positive impact across the board. Utility-scale, manufacturing, transmission, commercial, industrial, and residential segments will all benefit from lower interest rates.

Consumers opting to go solar with subsidies under the PM Surya Ghar: Muft Bijli Yojana could benefit from lower interest rates. “The promise of a lower interest rate for loans will be handy to convince fence-sitters,” according to Navin Bannadi, PlasmaSolar, a rooftop solar installer.

While most consumers prefer to use their own resources to fund the upfront cost of installing rooftop solar, a lower interest rate on loans can lure new consumers, he said.

Saatvik Green’s Jha was emphatic that the rate cut will provide crucial monetary support at a time when ongoing geopolitical and trade challenges can elevate capital expenditure and operational risks. “It effectively reduces the overall cost of capital, making large-scale investments more compelling and de-risking new projects.”

“This is particularly vital for companies in a significant capex mode, driving expansion and backward integration initiatives aimed at making India truly self-reliant in the solar value chain – from polysilicon and wafers to cells and modules,” he said.