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					</table>India’s clean energy transition initiatives are increasingly moving beyond utility-scale projects and into the country&#8217;s medium, small and micro enterprises (MSME) segment, with businesses exploring strategies to lower their power costs and become more sustainable in their operations.
According to banking executives, renewable energy financing has evolved significantly over the last few years, moving beyond conventional project lending into customized financial products designed specifically for MSMEs, commercial establishments, and industrial consumers seeking to reduce electricity costs and improve long-term operational efficiency.
Himanshu Gupta, Chief Manager at State Bank of India (<a href="https://onlinesbi.sbi.bank.in/" target="_blank" rel="noopener">SBI</a>), said the cost of setting up commercial solar projects remains substantial, making financing a critical part of clean energy adoption.
Depending on the project design and capacity, solar installations currently cost between ₹32.5 million (~$337,000)/MW and ₹45 million (~$467,000)/MW. Industrial consumers setting up capacities from 1 MW to 2.5 MW often require investments ranging from ₹60 million (~$623,000) to ₹120 million (~$1.25 million).
“Businesses should preserve liquidity for operations and growth instead of locking all their capital into asset creation,” Gupta said.
The scale of lending growth reflects rising industry demand. SBI’s Jodhpur region alone disbursed over ₹15 billion (~$155.7 million) for solar energy projects last year across districts such as Jodhpur, Jaisalmer, Barmer, Pali, and Jalore.
Lending Plans and Project Planning
Dedicated lending products such as SBI’s Surya Shakti Solar Finance are now designed specifically for MSMEs and commercial consumers adopting renewable energy systems. Faster approvals, structured assessments, and reduced turnaround times are gradually improving accessibility for industrial borrowers.
Even as financing becomes easier, inadequate project planning remains one of the biggest risks in renewable energy adoption.
Many businesses are installing rooftop solar systems simply because their competitors or neighboring industrial units have already done so. However, renewable energy systems should not be considered as uniform investments for all cases.
Industrial energy consumption varies sharply depending on the nature of operations, machinery usage, operating hours, and production cycles. As a result, solar projects that work efficiently for one business may fail to generate meaningful savings for another.
“What we need to evaluate is how much benefit renewable energy can actually provide us,” Gupta said, cautioning businesses against blindly following market trends.
Nitin Bansal, Business Head at <a href="https://www.idbi.bank.in/" target="_blank" rel="noopener">IDBI Bank</a>, said businesses must first understand their actual electricity requirements and operational needs before determining project size or financing structures. “The most important activity in this process is self-assessment. Financing should neither be excessive nor insufficient.”
According to Bansal, both overfinancing and underfinancing create long-term operational stress. An oversized project may create unnecessary debt burdens, while an undersized system may fail to deliver the intended reduction in electricity costs.
This has made detailed project reports (DPRs) central to renewable energy financing decisions. DPRs help banks evaluate technical feasibility, expected generation, projected savings, repayment capability, and long-term project sustainability.
Maintenance Risks
Another major concern is the lack of attention many businesses pay to long-term maintenance after project commissioning. Bankers noted that industries often focus heavily on installation costs while underestimating operational upkeep requirements. Poor maintenance can severely affect generation efficiency and financial returns.
“If an installation is not maintained properly, it can become a devastating burden instead of being a cash cow,” Gupta said. The concern becomes even more significant in financed projects where repayment instalments continue regardless of system performance.
Any decline in generation efficiency can therefore directly affect savings projections and repayment capacity.
Credit Importance
Renewable energy financing costs are increasingly linked to financial discipline and credit quality. According to Gupta, industrial renewable energy loans currently range between 8% and 10.5%, depending on financial stability, credit ratings, repayment history, collateral coverage, and management profile. Residential rooftop solar financing can begin at around 7%.
“The stronger your company’s financials are, the stronger your management will be, the clearer your CIBIL or CIC report will be,” he said. Competitive interest rates depend on these factors.
Bansal said IDBI follows a similar model, with interest rates for industrial projects starting at around 8.15% and at around 7% for residential solar.
He explained that banks evaluate several parameters, including financial statements, promoter experience, age bracket, collateral coverage, CIBIL scores, and commercial repayment history, before determining interest rates.
At the same time, banks are gradually becoming more flexible on collateral requirements, particularly under Credit Guarantee Fund Trust for Micro and Small Enterprises-backed lending structures. Bansal said several renewable energy loans up to ₹5 million (~$51,900) have already been approved without collateral support wherever regulations permit such financing.
These conversations were part of the deliberations at Mercom India’s recent C&amp;I Clean Energy meet at Jodhpur, Rajasthan. Panelists also spoke about the growing industry shift toward battery-backed solar systems. With storage integration becoming increasingly important across several states, lenders indicated that banks are now open to financing solar-plus-storage systems and may introduce more specialized lending products as market demand evolves.
The next Mercom India C&amp;I Clean Energy Meet event will be held in <a href="https://www.mercomindia.com/event/c-and-i-clean-energy-meet-2026-hyderabad" target="_blank" rel="noopener">Hyderabad</a> on August 21, 2026.

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					</table>With rising electricity costs and an increased push for decarbonization, banks across India are strengthening their green lending portfolios to support the installation of captive and rooftop solar systems.
At the recent Mercom India <a href="https://www.mercomindia.com/event/c-and-i-clean-energy-meet-2025-coimbatore" target="_blank" rel="noopener">C&amp;I Clean Energy Meet</a> in Coimbatore, leading bankers outlined how they are adapting loan products, processes, and terms to meet the evolving energy needs of micro, small, and medium enterprises (MSMEs).
Representatives from the Small Industries Development Bank of India (<a href="https://www.sidbi.in/en/" target="_blank" rel="noopener">SIDBI</a>), State Bank of India (<a href="https://www.onlinesbi.sbi/" target="_blank" rel="noopener">SBI</a>), <a href="https://www.idbibank.in/" target="_blank" rel="noopener">IDBI Bank</a>, and <a href="https://bankofmaharashtra.in/" target="_blank" rel="noopener">Bank of Maharashtra</a> shared details about their green financing strategies.
Financing Options 
R. Paramasivam, Assistant General Manager, SIDBI, stated that his organization offers term loans covering up to 80% of the project cost for ground-mounted and rooftop solar installations. Collateral is not required for rooftop solar systems; instead, the margin necessary is converted into a fixed deposit and held as security.
SIDBI also supports greenfield projects and third-party power purchase agreements (PPAs), including those from developers with no prior experience in the sector.
“We even finance projects above ₹100 million (~$1.15 million), subject to a detailed techno-economic viability study,” Paramasivam added. Applications and documentation can be filed online, with a processing time of around 15 days.
Sankara Subramanian V, AGM, SBI, stated that the bank offers similar flexibility, especially for larger group captive solar projects. “For rooftop solar, the margin requirement is as low as 20% (financing), and we go up to ₹1.5 billion (~$17.29 million) for spinning mills. Our interest rates range from 8.6% to 9.7% based on internal and external credit ratings. We do not require collateral for solar systems.”
Subramanian stated that group captive solar projects with a value below ₹500 million (~$5.76 million) require a 28% margin, while those exceeding this amount require a 30% margin. The borrowers must have a rating of at least BBB, meaning they have positive ongoing viability prospects. SBI employs a committee-based approach for approvals and requires a signed PPA and viability study before disbursing funds.
IDBI takes a more conservative stance. “We do not have standalone green energy products for commercial and industrial (C&amp;I) yet, but we fund captive solar projects by combining them with existing commercial or home loans,” said Purushotham A P, AGM, Assets, IDBI Bank. The bank calculates eligibility based on the borrower’s existing credit profile and offers interest rates ranging from 8.45% to 9.5%.
Bank of Maharashtra offers green energy finance to a diverse range of customer groups, including MSMEs, agricultural customers, and homeowners. “We finance rooftop solar systems under the PM Surya Ghar Yojana at rates starting from 7.35%,” said SN Balaji, AGM, Bank of Maharashtra. MSMEs can access loans from the bank with tenures ranging from seven to 15 years and interest rates varying from 8.5% to 11%, depending on the borrower’s profile.
RBI’s Rate Cut Impact on Green Lending
Speakers at the meeting agreed that the Reserve Bank of India’s (RBI) recent announcement of a repo rate cut and a reduction in the cash reserve ratio (CRR) has created a favorable lending environment.
Paramasivam emphasized that while the CRR cut does not directly impact SIDBI, the repo-linked rate reduction will bring interest rates even lower. “Our current rates start at 8.45%, and we expect this to reduce further.”
Subramaniam confirmed a similar case for SBI. “Our rates are reset on the 15th of every month, and a downward revision is expected.”
acknowledged that repo-linked lending rates are now leading to increased affordability. “Even though we do not yet have standalone green energy products, banks are now seeing increased interest from MSMEs and larger corporates,” he said.
Balaji observed that the timing of the RBI’s decision was strategically aligned with market needs. “This (decision) comes at the start of the festive and high-consumption seasons. Additional liquidity from the CRR cut will help banks be more aggressive in lending,” he said.
“A borrower who previously qualified for ₹3 million (~$34,581.93) might now get ₹3.3 million (~$38,040.12). This increased credit availability makes rooftop solar more viable for homeowners and small businesses,” added Balaji.
Repayment Terms and Pre-Closure Penalties
SIDBI charges penalties only if a borrower closes the loan early due to refinancing with another lender. “If the customer faces genuine business stress, we waive repayment charges,” said Paramasivam.
SBI does not levy any repayment charges for MSME borrowers. Subramaniam stated, “For captive consumers, solar is now mandatory. You are behind schedule if you have not switched. Hedging 80% to 95% of your power through solar can protect you from inflation and future tariff hikes.”
Purushotham stated that MSMEs are typically exempt from pre-closure penalties, particularly for term loans and working capital.
Balaji noted that while corporate borrowers may incur some prepayment charges due to the capital costs involved, the broader benefits of switching to solar energy far outweigh the costs. “India is geographically well-positioned to benefit from solar energy. Its adoption is not just about economics but also about national energy security,” he concluded.
Advice for C&amp;I Units 
All speakers encouraged C&amp;I consumers to switch to solar energy, particularly given the decreasing interest rates and streamlined banking processes.
Subramaniam stated, “If you have not moved to solar yet, you are already late. Equity is expensive, and the cost of not adopting solar is only going to rise. Banks like ours are ready to back you if your PPAs and cash flows are in place.”
Purushotham said that demand is rising, and banks are ready to meet it.
Balaji urged businesses to act quickly. “Solar is no longer optional; it is a strategic necessity. With lower borrowing costs, favorable policies, and rising electricity rates, now is the time.”
The speakers emphasized that, with digital lending platforms, interest rates trending downward, and dedicated green energy funding options becoming more mainstream, the transition to solar has never been more accessible.
Mercom India will host its next ‘<a href="https://www.mercomindia.com/event/c-and-i-clean-energy-meet-2025-hyderabad" target="_blank" rel="noopener">C&amp;I Clean Energy Meet’</a> in Hyderabad on August 22, 2025.
Mercom India will also be <a title="https://www.mercomindia.com/event/renewables-summit-2025" href="https://www.mercomindia.com/event/renewables-summit-2025" target="_blank" rel="noreferrer noopener">hosting</a> the fifth edition of its Renewables Summit 2025 on July 24-25, 2025, at the Hyatt Residency, New Delhi. This event brings together all the stakeholders who are shaping India’s renewable energy industry.
You can register for the Summit <a href="https://www.mercomindia.com/event/renewables-summit-2025/register" target="_blank" rel="noopener">here</a>.

Banks Ready and Willing to Finance Solar for MSME Energy Transition

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					</table>As India accelerates its clean energy goals, financing has become a critical enabler for commercial and industrial (C&amp;I) entities adopting solar. Structured funding options, ranging from MSME-focused bank loans to lease-based and turnkey financing, are making solar adoption more accessible and cost-effective.
At the recent C&amp;I Clean Energy Meet hosted by Mercom India in Mumbai, leading financial services companies and solar solution providers came together to share details on obtaining green loans for rooftop and captive open-access solar systems. The panel discussion featured representatives from SIDBI, Siemens Financial Services, IDBI Bank, Credit Fair, and Oorjan Cleantech.
Loan Products 
Sheetal Sherke, Deputy General Manager, <a href="https://www.sidbi.in/en/" target="_blank" rel="noopener">SIDBI</a>, said the bank has two dedicated programs for clean energy financing—the End-to-End Energy Efficiency (4E) and the Green Finance programs.
“Both are aimed at MSMEs. Applicants can submit documents online. The 4E program offers up to ₹150 million (~$1.75 million), while Green Finance is available up to ₹500 million (~$5.84 million),” said Sherke.
Poonam Pawar, AGM Asset, <a href="https://www.idbibank.in/" target="_blank" rel="noopener">IDBI Bank</a>, spoke about the IDBI’s dedicated offering under the “IDBI Surya Shakti” program tailored for farmers, as well as commercial and industrial units. “We prioritize clients who have maintained a consistent relationship with the bank over the last two to three years,” she added.
<a href="https://www.siemens.com/in/en/company/about/businesses/financial-services.html" target="_blank" rel="noopener">Siemens Financial Services</a> has expanded its financial services arm in India over the past 14 years. Abhay Dixit, Vice President of Business Development Siemens Financial Services, stated that the company offers loans and leasing models tailored for solar and clean energy projects. “We offer rental-based solutions that don’t require collateral or no objection certificates (NOCs) from existing banks. These products allow clients to retain their working capital lines,” he explained.
Gautam Das, CEO of <a href="https://www.oorjan.com/home" target="_blank" rel="noopener">Oorjan Cleantech</a>, outlined the company’s comprehensive turnkey model: “We provide full-cycle project execution from land acquisition and engineering to funding and maintenance. Our financial offerings include loans, leases, and PPAs with buyout options.”
Vikas Aggarwal, CEO of <a href="https://www.creditfair.in/" target="_blank" rel="noopener">Credit Fair</a>, said Credit Fair focuses on small commercial and residential rooftop solar projects. He said, “We have already financed over 9,000 rooftop systems, amounting to around 16 MW of capacity across India. Applications are processed digitally through our EPC partners.”
Interest Rates and Loan Tenure
SIDBI offers loans at interest rates ranging from 8.75% to 10%. The 4E program’s repayment period is up to seven years with a 12-month moratorium. The Green Finance program offers repayment terms of up to 10 years. “We calculate ratings internally, based on GST data, CIBIL scores, and borrower history,” said Sherke.
Siemens Financial Services does not offer standard interest rates for all clients but provides monthly rentals based on the project, down payment, and tenure. Dixit said, “We are a triple-rated company and offer competitive rentals tailored to each client. We usually see tenures between 4 and 5 years, but can extend this if necessary.”
Oorjan’s Das clarified how the cost of capital impacts interest rates. He said, “If you’re taking loans from a large NBFC with a Triple-B-Plus or better rating, you can expect interest rates below 10%. But small NBFCs often lend at 14–15% due to the higher cost of funds.”  Financial leasing with depreciation and GST set-offs for high-quality projects can lower the effective cost.
Pawar said the IDBI Bank offers rates ranging between 9.10% and 13.84%, depending on project appraisal and credit rating. The tenure extends from seven to ten years.
Credit Fair’s rates are higher, with unsecured loans priced between 12% to 14% and 15% to 18% on a reducing balance basis. “Our tenure is typically two to three years, especially after accelerated depreciation benefits,” said Aggarwal.
Siemens also provides a customized strategy. Dixit said the company aligns its internal ratings with available external scores and creates bespoke financing solutions without relying on the client’s primary banking limits.
Collateral and Credit Rating Mechanisms
Collateral requirements and credit evaluation processes vary among the participating organizations.
Siemens’ leasing model offers financing without needing collateral or NOCs. “The equipment acts as the asset, and the repayments come through rental structures. It’s tax-efficient and avoids interfering with banking limits,” said Dixit.
Oorjan uses lease and PPA models, which allow depreciation and GST benefits to be passed on to the customer. “You can save 30% on capital deployed if structured correctly. Even if a customer doesn’t want to buy the asset immediately, our model allows test-and-buy later,” explained Das.
IDBI Bank assesses credit ratings as part of project appraisal and determines collateral requirements based on the proposal’s size and scope.
Credit Fair uses only internal credit evaluations. It relies on cash flow analysis and business viability. “Loans up to ₹5 million (~$58,400) are unsecured,” said Agarwal.
Advice for C&amp;I Units Considering Solar
Experts strongly encouraged MSMEs to adopt renewable energy solutions, particularly solar power, citing its financial and environmental benefits. Sherke recommended rooftop and ground-mounted solar systems, noting that energy cost becomes almost negligible after four to five years, and added that early repayment penalties could be up to 3% plus GST.
Dixit emphasized the cost-effectiveness of lease models over equity, explaining that lease-based financing allows businesses to preserve their banking limits. He also stressed the importance of involving EPC partners early for integrated engineering and financing.
Das pointed out that delayed decision-making hinders progress despite the clear 30% return on capital from solar investments, urging partner-financed and pay-as-you-go models that minimize risk for businesses.
Aggarwal urged immediate action, especially in states like Maharashtra, which are experiencing rising electricity tariffs, stating that rooftop solar energy is key to cost control and decarbonization.
The financial companies emphasized that while the financing landscape for green energy is diverse, businesses must choose partners and models that align with their operational needs and fiscal capacity. With flexible loan products, digital processing, and evolving lease and PPA structures, adopting renewable energy is becoming easier and more efficient for India’s C&amp;I sector.
The next Mercom India C&amp;I Clean Energy Meet event will be held in <a href="https://www.mercomindia.com/event/c-and-i-clean-energy-meet-2025-pune" target="_blank" rel="noopener">Pune</a> on May 16, 2025.
At the last C&amp;I Clean Energy Meet hosted by Mercom in Chennai on March 7, 2025, industry experts from leading financial institutions <a href="https://www.mercomindia.com/attractive-financing-options-rooftop-solar" target="_blank" rel="noopener">discussed</a> multiple lending options, loan structures, and interest rates available for businesses investing in solar energy.
<a href="https://www.mercomindia.com/lead-generation-form" target="_blank" rel="noopener">Contact us</a> if you plan to install solar and need guidance or vendor recommendations.

A Guide to Solar Financing Options for MSMEs at Competitive Lending Rates

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					</table>As businesses increasingly transition toward clean energy, financing options for solar projects have become a crucial discussion topic. At the recent C&amp;I Clean Energy Meet hosted by Mercom in Chennai, industry experts from leading financial institutions discussed multiple lending options, loan structures, and interest rates available for businesses investing in solar energy.
Several financial institutions, including the Small Industries Development Bank of India (<a href="https://www.sidbi.in/en/" target="_blank" rel="noopener">SIDBI</a>), <a href="https://www.idbibank.in/" target="_blank" rel="noopener">IDBI Bank</a>, and the <a href="https://bankofmaharashtra.in/" target="_blank" rel="noopener">Bank of Maharashtra</a>, outlined their diverse lending products tailored for solar and other renewable energy initiatives at the event.
Anburaj C, Deputy General Manager, SIDBI, explained that SIDBI offers loans to micro, small, and medium enterprises (MSMEs) with minimal documentation requirements. Using digital processing, borrowers with a three-year balance sheet can avail of loans up to ₹20 million (~$229,301) within 30 minutes. “Loans exceeding this amount follow a slightly extended but simple approval process, typically completed within seven to ten days. Approvals for smaller loans up to ₹3 lakh (~$3,439) can be completed at the branch level in four days,” he said.
Chandramohan S, Assistant General Manager, IDBI Bank, highlighted that IDBI has financed project-based green energy initiatives, including large-scale solar projects. Recently, IDBI extended ₹1.5 billion (~$17.19 million) to a corporate entity for a clean energy project.
S. Sridhar, Chief Manager at the Bank of Maharashtra noted the bank finances rooftop solar installations and offers specialized loan products for MSMEs, solar engineering, procurement, construction companies, and manufacturers. The bank’s Mahaswagatham program provides loans ranging from ₹50 million (~$573,252) to ₹100 million (~$1.14 million) at competitive interest rates.
Interest rates for solar financing are becoming increasingly competitive to make green investments more viable for businesses. Bank of Maharashtra offers interest rates starting at 6.8% for loans up to ₹300,000 (~$3,439) for 3 kW projects and 10.05% for loans above ₹300,000 (~$3,439).
SIDBI offers an interest rate reduction of 25 basis points for green energy projects, bringing their standard rates to between 8.7% and 9.4%. Government subsidies play a significant role in reducing borrowing costs for green energy projects. SIDBI’s Green Investment and Financing for Transformation (GIFT) program provides a 2% interest subvention for micro and small enterprises investing in rooftop solar to reduce interest rates further. This subvention applies to investments of up to ₹20 million (~$229,301) to make financing more attractive for small businesses.
IDBI Bank’s interest rates range from 8.5% to 10%, depending on internal and external credit ratings. IDBI follows internal credit ratings for loans below ₹250 million (~$2.86 million), while loans above this amount require an external credit rating with a minimum threshold of BBB (lower-medium-grade credit rating).
SIDBI is also a nodal agency for the Tamil Nadu Government’s interest subvention program, which provides back-ended interest subsidies for businesses investing in energy-efficient machinery.
Banks have streamlined their loan processing systems, making them faster and more accessible. SIDBI operates a fully digital, end-to-end loan process, enabling MSMEs to apply online and receive sanctions without visiting a branch. Bank of Maharashtra allows customers to apply via government portals such as Surya Ghar and Jan Samarth, reducing approval times to a minimum of seven days for rooftop solar financing.
IDBI Bank follows a similar process but with a turnaround of fifteen days for corporate loans due to additional due diligence requirements. IDBI and other banks conduct thorough credit evaluations, with due diligence reports and financial scoring playing a critical role in determining eligibility and interest rates. While SIDBI does not require a project report for existing companies, larger projects may require a techno-economic viability report to assess financial feasibility.
Collateral-free loans are now available through various government and bank-backed programs. SIDBI provides collateral-free loans up to ₹100 million (~$1.14 million) under the Credit Guarantee Program. Its Mutual Credit Guarantee Program extends collateral-free lending up to ₹1 billion (~$11.46 million).
Credit rating considerations vary across institutions. Bank of Maharashtra relies on the Credit Information Bureau of India (CIBIL) scores, with a minimum threshold of 680. However, loans below this score are assessed on a case-by-case basis. IDBI Bank requires an external credit rating for loans above ₹250 million (~$2.86 million), while loans below this amount follow internal rating parameters. SIDBI does not require external ratings but evaluates management strength, financial health, and industry factors for risk assessment.
Experts at the event strongly encouraged businesses to invest in solar energy to reduce operating costs. Many industries, especially in power-intensive sectors such as textiles, have successfully lowered operating expenses by transitioning to solar. Chandramohan shared an example of a textile company that had previously invested in wind energy but recently installed rooftop solar for its captive consumption to further reduce energy expenses. The company’s management recognized that profit margins were shrinking due to rising raw material costs, making solar a strategic move to cut operating expenses.
Experts also advised businesses to approach banks directly rather than relying on intermediaries to ensure transparency and avoid unnecessary costs. They warned that intermediaries could increase costs and delay financing, making it more beneficial for businesses to apply directly through digital platforms or visit bank branches for assistance. Bank of Maharashtra has 2,500 branches across India, allowing for faster approvals at the local level, with some loans being sanctioned at the branch manager’s discretion.
The discussions underscored how financial institutions increasingly prioritize clean energy investments, making funding more accessible for businesses. With low interest rates, government-backed subsidies, and streamlined digital processing, there has never been a better time for MSMEs and corporates to invest in solar energy. By adopting solar power, businesses can cut electricity costs and benefit from going green.
The next Mercom India C&amp;I Clean Energy Meet event will be held in <a href="https://www.mercomindia.com/event/c-and-i-clean-energy-meet-2025-mumbai" target="_blank" rel="noopener">Mumbai </a>on April 17, 2025.
<a href="mailto:sales@mercomindia.com?subject=Seeking%20Solar%20Installation%20Guidance%20and%20Vendor%20Recommendations%20for%20Business" target="_blank" rel="noopener">Contact us</a> if you plan to install solar and need guidance or vendor recommendations.

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