Aiming to accelerate clean energy goals, the government is considering priority bank lending for renewable power developers.
Developers of renewable energy projects may soon get improved access to cheaper bank loans, as the government considers mandating priority sector lending (PSL) for the sector. The Ministry of New and Renewable Energy (MNRE) is preparing a recommendation for the finance ministry to carve out a dedicated sub-target within PSL for green energy projects.
At present, banks are required to allocate 40% of their adjusted net bank credit to priority sectors such as agriculture, micro-enterprises, and weaker sections. While renewable energy is already included under PSL, lending through this route has been limited. Officials say a separate sub-target could ensure guaranteed credit flow to developers, supporting faster project execution.
Stronger credit availability could help India meet its ambitious target of 500 GW of non-fossil fuel capacity by 2030 and net-zero emissions by 2070. Greater access to loans may allow developers to complete projects quicker and at lower costs, reducing tariffs for consumers.
Between FY14 and January 2025, renewable energy accounted for just 1% of total bank credit under PSL, despite policy amendments since 2015 to enhance liquidity. Experts believe a dedicated mandate would significantly boost financing for solar, wind, green hydrogen, and hybrid projects.
Industry watchers note that global investors are also showing growing interest in India’s renewable energy sector, given robust long-term returns and government support. However, easier domestic bank credit could further accelerate investments and help reduce dependence on fossil fuels.
