India’s clean energy transition initiatives are increasingly moving beyond utility-scale projects and into the country’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 (SBI), 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 IDBI Bank, 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&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&I Clean Energy Meet event will be held in Hyderabad on August 21, 2026.