New Delhi [India], March 26 : The Reserve Bank of India's (RBI) revised guidelines for Priority Sector Lending (PSL) have helped ease credit constraints in the renewable energy sector, according to a report by the State Bank of India (SBI).
The report highlighted that RBI's explicit recognition and prioritization of renewable energy under PSL norms have led to a higher share of non-conventional energy (NCE) credit within the overall energy credit.
The report, based on a dummy variable linear regression model for FY10-24, indicates that policy interventions in the sector have encouraged increased credit flow to non-conventional energy projects. Over the years, the central bank has expanded the scope of PSL norms to facilitate lending to clean energy initiatives.
It said "Explicit recognition and prioritization of renewable energy within the PSL framework has alleviated credit constraints thereby escalation in the share of non-conventional energy credit to the overall energy credit"
On July 1, 2015, RBI included loans up to Rs 15 crore for projects such as solar-based power generators, biomass-based power generators, micro-hydel plants, and other non-conventional energy-based public utilities like street lighting systems and village electrification.
Later, on September 4, 2020, this loan limit was doubled to Rs 30 crore per borrower, reflecting strong support for the sector. In the latest revision, RBI has further raised the cap to Rs 35 crore per borrower, marking a 17 per cent increase. However, for individual households, the maximum loan amount remains unchanged at Rs 10 lakh.
Although the Rs 5 crore increase in the lending limit may seem small compared to the 2020 revision, the report believes such incremental policy measures will significantly contribute to the growth of the renewable energy sector. By supporting clean energy financing under PSL, these measures align with India's broader environmental goals.
The report said "the small policy interventions definitely will go long way, for the NCE sector, to achieve dual objective of clean energy".
India has set ambitious targets for clean energy expansion, aiming for 500 GW of non-fossil fuel installed capacity by 2030 and achieving Net Zero emissions by 2070.
The RBI's support through PSL norms is expected to play a crucial role in achieving these objectives by making credit more accessible for green energy projects.
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