Renewable Power Firms May Get Better Access to Bank Loans

Developers of renewable power may get enhanced access to cheaper bank loans in the near future, with the Centre working on a proposal mandating dedicated priority lending for such projects.

- Rituraj Baruah & Subhash Narayan

The ministry of new and renewable energy (MNRE) is preparing a recommendation to the finance ministry to carve out a sub-target under priority sector lending (PSL) for renewable energy projects, two people aware of the development said.

Priority sector lending rules require banks to allocate a specific portion of their loans to certain sectors that might not otherwise receive timely credit. While renewable energy is among the priority sectors, the proposal aims to ensure guaranteed lending to the sector.

Currently, banks must allocate 40% of their adjusted net banking credit or their credit equivalent amount of off-balance sheet exposure (CEOBSE), whichever is higher, to PSL, and sub-targets have been prescribed only for agriculture (18%), micro enterprises (7.5%), and loans for economically weaker sections (12%).