96 thoughts on “Indian Banks and their Lending for the Solar Sector”

1. Dr jaishree a prasad December 9, 2015 at 2:58 pm

   Good day,
   I, Dr Jaishree A Prasad would like to get some more info n details on setting up solar power plant.

   Thanks n regards
   Dr Jaishree A Prasad,M.Tech ,PhD (IIT Delhi)
   Director, Jaas lifestyles n amusement pvt ltd.

   Reply
   1. Narasimhan Santhanam Post authorDecember 10, 2015 at 8:56 am

      Dear Dr Prasad

      Many thanks for asking. Can you kindly let me know what sort of info you are looking for?

      You may also write your requirements in detail to narsi@solarmango.com and we will revert at the earliest

      Thanks once again

      Narasimhan Santhanam
      Cofounder & Director
      Solar Mango

      Reply
2. Mahesh Rawali December 10, 2015 at 10:07 am

   Other than IREDA are there any other gov funding agencies for solar power plants, like for small solar power plants of 1-3 MW size?

   Reply
   1. Narasimhan Santhanam Post authorDecember 10, 2015 at 12:47 pm

      Hi Mahesh

      Many thanks for the question.

      Of course, there are the many banks other than IREDA, but if you are asking about specialised financing agencies as part of the Indian government, I can point you to PFC (Power Finance Corporation) which now has a dedicated division for renewable energy financing, called PFC Green.

      Hope this helps

      Narasimhan

      Reply
      1. Narasimhan Santhanam Post authorFebruary 6, 2016 at 5:18 am

         By the way, the following links give more details on what PFC does

         Sectors financed – http://pfcgel.com/Content/Sectors.aspx

         Projects financed (you can see a range of solar power plants financed in this list, from 1 MW all the way to 10s of MW) – http://pfcgel.com/Content/sanctionedprojects.aspx

         Reply
      2. Aby September 29, 2016 at 11:21 am

         Can you point out some bank names that provide Exact loan for solar roof top ?? I Tried with all national and private banks, and can you please assist how to applay for PFC

         Reply
3. Madhusudan Bisht December 10, 2015 at 10:09 am

   My bank is asking for 130% collateral. What is the logic in asking for collateral higher than the total project costs?

   Reply
   1. Narasimhan Santhanam Post authorDecember 10, 2015 at 4:31 pm

      Madhusudan…Hi! Thanks for your comment.

      I have also heard of instances where banks had asked for 100+% as collateral for solar power plants; in many of these same cases however, I can to know that the bank had relented and accepted 100%.

      Now, 100% collateral isn’t a great result either, but right now, unless you are a medium/large corporate with a strong balance sheet, and had done years of dealings with the bank, getting loans without a large % as collateral will be difficult.

      As I mentioned earlier, IREDA is OK to provide loans at less than 30% collateral, so you might want to try that for your loan!

      Reply
4. Mahesh Maheswari December 10, 2015 at 10:11 am

   One problem is that Indian banks do not understand many terms and technologies used for solar pwer plants. Example is the use of trackers. Trackers increase project cost by about 10% but banks are not sure if trackers provide any benefits and so insist on having project costs at only Rs 6 crores / MW which is applicable only without trackers…

   What is your suggestion to convince banks about the new technologies such as trackers?

   Reply
   1. Narasimhan Santhanam Post authorDecember 10, 2015 at 4:52 pm

      Mahesh. I appreciate your concern, but I think banks are getting familiar with most aspects of solar PV, so I doubt that the understanding of or rather the lack of technology understanding by banks will be a serious problem any more.

      Any way, in most cases, for power plant sizes 1-5 MW, banks are taking 100% collateral security, so they should not be too worried about the technology uncertainties, what do you say!

      Reply
5. Neha Natwarlal December 10, 2015 at 10:13 am

   What about financing from outside India? My business partner says she can arrange for US based financing at less than 7% overall. Is this possible and why are Indian companies not going for foreign loans? Because the interest rates in many western countries are very low, less than 4%

   Reply
   1. Narasimhan Santhanam Post authorDecember 10, 2015 at 4:37 pm

      Hi Neha. Thanks for your query

      Yes, international financing is certainly an option, but it might not be feasible for everyone.

      Firstly, this option might not be easy for small solar power plants, say less than 5 MW, as international banks might not be willing to go such a long stretch to lend relatively small amounts (for them, that is)

      Second, international banks will look for a number of qualifying factors such as credit rating etc., for which many Indian developers might not quality

      Third, while the base rate for international financing might be 2-3%, once you add the rest, especially adding the charges to cover the exchange rate and any other risks such as country risks, the final lending rate might be in the range 8.5-9%.

      So, do explore international financing avenues, but keep the above points in mind to set your expectations and outcomes…

      Reply
   2. L. JAYA RAJU December 16, 2015 at 5:55 pm

      HI NEHA . THANK YOU FOR GOOD QUERY,
      WE ARE PROVIDE FINANCE @7 P.A FOR SOLARPOWER PLANTS , ALSO MINIMUM SIZE 8 MW OR ABOVE .
      IF YOU ARE INTERSTED FOR SET UP THE PLANT , PLZ REACH AT : infoprojects999@gmail.com .

      Reply
      1. Brahatheeswaran February 6, 2016 at 5:27 am

         Dear Jaya Raju

         Can you let me know how you are able to provide loans at 7%, surely this must be through international borrowings, but can you throw some light on your sources so that I can check with one of our clients who are putting up a 25 MW solar power to look into this? Thanks

         Reply
6. Mahesh December 11, 2015 at 12:34 pm

   Dear Sir,
   How to play about institute Level this finance Management, Like depreciation, and subsidy Like Please some details if you Have any draft proposal/ and information.

   Reply
   1. Narasimhan Santhanam Post authorDecember 11, 2015 at 12:54 pm

      Dear Mahesh

      Thanks for your comment/query.

      But I’m afraid I do not understand what you wish to know…

      Can you elaborate please, thanks!

      Reply
   2. Kathy February 6, 2016 at 2:32 pm

      I think he wants to know from a financial expert how each of these like depreciation, subsidy work and how they should be incorporated in financial calculations

      I am right Mahesh sir?

      Reply
7. Narasimhan Santhanam Post authorDecember 11, 2015 at 1:00 pm

   I would also like to add here a comment that was included for another post ( http://www.solarmango.com/blog/2015/12/08/costs-for-small-mw-scale-grid-connected-power-plants-in-india-lcoe-and-optimal-tariff/ )

   ”
   Dear Narasimhan,

   This is a very detailed and useful article and appreciate your attention to pertinent details in your analysis.

   From my personal experience with at the least three nationalized banks, all of them demanded an overall DSCR of minimum 1.3 and one of the banks asked for 1.5. None of the banks I dealt with, both nationalized banks and Private banks, were ready to offer more than 10 years loan repayment period. Even with 100% collateral, banks are willing to provide a max of 10 year repayment period only, for small size (1 to 5 mw) projects.

   I completely agree with you that using trackers (Single, dual, etc based on the latitude) makes business/financial sense and we need to be installing more projects in India with trackers.

   The idea of smaller size solar parks wherein smaller size developers can still benefit from the savings that comes with having their plant inside a solar park (ease of evacuation/right of way and the savings that comes with that, ease of land acquisition, O&M cost, etc) should gain more prominence in India. The way things are moving in the solar domain now in India, it looks like only the Wellspuns, SunEdisions and ACMEs can do Utility scale Solar PV projects.

   As you said, it is indeed heartening to see the Solar filed take off in India. We have all been waiting a long time for this.

   Thanks again for your excellent, incisive analysis. Looking forward to more such articles from you where facts and numbers are presented and elucidated.

   Gopal
   ”

   And my reply was

   ”
   Thank you Gopal, and it is nice to say Hi here once more.

   On DSCR, I agree. While some banks insist on 1.5, they themselves know it is pretty high and I am sure most will eventually agree for 1.3

   On repayment period, I am surprised you say that banks are not willing to give you over 10 years. Because, at lease for some of the banks we got in touch with for our clients, they were OK upto 15 years (including the 1 year moratorium). Which banks did you check with, by the way?

   Smaller solar parks is indeed a good idea. Perhaps 25 MW each, is that the scale you have in mind? Well, I guess this can be private sector initiative as well, though most folks I have met who are putting up solar parks are looking at 100 MW and above.
   The apprehension you have about solar becoming a Big Boys game is shared by many of us. Well, not sure how the future will move, but let us also realise that it might not be that easy for large scale solar power plants to be erected all over India. On paper, a few 500 MW solar parks facilitating the move to satisfy the government’s target of 60 GW looks like a good idea, but when it comes to actually getting it done, in terms of land procurement, having enough evacuation infrastructure, it might be more difficult than we think.

   We will come to know of how this transpires in 2016. I am only hoping that small businesses also have a role to play in the MW scale, grid connected solar power plants in India. Time will tell.
   “

   Reply
8. Kamal Agrawal December 11, 2015 at 1:03 pm

   Recently, the government made solar as part of the priority lending sector. Will this make solar loans cheaper, and can this also make access to loans for the solar sector easier?

   Reply
   1. Narasimhan Santhanam Post authorDecember 12, 2015 at 4:43 am

      Hi Kamal

      Thanks for asking

      In short, I doubt that the inclusion of solar in priority lending alone can make a big difference.

      The reason is as follows:

      The priority lending categorization essentially means that lending to solar also can be included as priority lending for the Indian banks. Now, solar is not the only priority sector for banks (agriculture, for instance, is another prominent priority sector). As a result, most banks can easily fulfil their priority sector lending requirements without having to lend to solar. Thus, it all depends on how banks view the overall attractiveness of lending to the solar power sector – if they feel it is not very attractive, they can pretty much ignore lending to solar and still fulfil their priority sector lending mandates.

      It would have been a different story had there been something called Solar Lending Obligation for the banks (similar to Solar purchase obligation or renewable purchase obligation)!

      On your question of cheaper rates because of inclusion in the priority sector, I doubt it. I spoke on this to many of my contacts in the banking industry, and they feel that inclusion in the priority sector alone could not have any much effect on the interest rates – the most they can think of is a 0.25-0.5% decrease, nothing more substantial. In this context, it is worth noting that priority sector categorization is not the same as a decree to issue soft loans!

      Hope I made some sense.

      Reply
9. Kunal Modi December 11, 2015 at 1:10 pm

   Some EPCs are saying they can get us buyers credit from the solar panel manufacturer for a period upto 3 years. And they say as a result of this,the overall interest rate can come down.

   Is this possible and what is the procedure for this?

   Reply
   1. Narasimhan Santhanam Post authorDecember 12, 2015 at 5:03 am

      Kunal

      Thanks for your question.

      Yes, in theory such buyers credit or supplier’s credit is indeed available from some of the module makers, even some of the premier tier 1 module makers. But I have not seen too many small developers availing it.

      Some of the things I can share about this credit facility:

      The overall impact it can make on your IRR and cash flow might not be significant. Consider it like this: The supplier is essentially giving you a loan at a much cheaper rate (it might be effectively about 8%, the figure being the total of a small price increase because of the loan and any hedging you might have to do for the exchange rate as you will be paying in Rs for a set dollar price). This low interest rate is available for perhaps a max of 3 years; and it is available only for the module portion of the cost. which is about 50% of total. Thus, a crude calculation suggests that the effect it can have on IRR will be something like (4%)*(3/10)*50% = 0.6% approx. 4% is the difference between the interest rate you get from banks (12%) and the effective interest rate for the supplier credit, 3/10 denotes the ratio of your payment period to the supplier vs the payment period to your bank and 50% is the proportion of project cost taken up by the supplier credit. Of course, what I have done is just a crude calculation, it might not be correct in the financial accounting sense, but it will still be close to what you eventually arrive at after detailed financial and cash flow analysis.

      Now, 0.6% is nothing to write home about, especially because there could be some additional transactional and other soft costs involved in getting the supplier credit which could further bring down the already paltry increase in IRR.

      2. Even assuming you are OK with the marginal increase you get in your IRR, such supplier credit might be available only for a certain scale of solar power plants. Only a few EPCs I interacted with on this were confident they can get supplier credit for one of my clients. I spoke to at least 3 Tier 1 solar module firms on this, and none of them were offering this credit to Indian solar power plant developers.

      So: Overall, I think the supplier credit concept is something that might not be super useful for smaller scales MW power plant developers, though those putting up power plants higher than 10 MW could consider it seriously.

      Reply
10. Manisha Bhatia December 11, 2015 at 1:15 pm

    We keep hearing about government stepping in and doing something for solar sector to get cheaper loans. But you are saying the interest rates are still at 12% .

    So what has the government’s actions actually achieved so far?

    Reply
    1. Narasimhan Santhanam Post authorDecember 12, 2015 at 4:49 am

       Hi Manisha

       Thanks for asking the rather interesting and important question.

       In short, the answer is, nothing substantial has been achieved in terms of interest rates because of the government’s talk of solar power. In fact, even the 1% decrease in interest rates offered for solar (from 13% to 12%) is not because of any government push specifically for solar, but because of RBI’s actions in general, which cut the interest rate by 50 basis points, and because of the banks becoming more familiar with solar power sector.

       The only domain where I can see government action having resulted in something is in the lending rates of IREDA which are now pretty good at 10.2-11.4% ( see here – http://www.ireda.gov.in/forms/contentpage.aspx?lid=740 ).

       Outside IREDA, I have not seen a big effect on nationalised and private banks.

       I reckon that we can say the government’s actions and policies have made a big difference if we are able to bring the lending rate to less than 10%. Let us hope that the day is not too far off.

       Reply
11. S Padmanabhan December 20, 2015 at 3:49 pm

    I do not see why banks should relax norms for solar projects that they wont do it for thermal or wind projects.Given the payment record of Discoms, banks will have to inisist on higher DSCR, higher debt service reserve etc.If wind power payment record is any guideline, solar payment record cannot be any better.Every state is delaying payments.Interest rate is what the economy offers.The biggest problem this accelerated growth of solar power would bring is the inability of the transmission system to handle such infirm power -particularly peak power. 100GW looks attractive ,fabulous- it will also give almost 80000 MW of peak power for two hours a day- ie 80Million units per hour for atleast two hours. Given that our firm power capacity is around 150000MW- and operational capacity at 70%PLF is 100GW-100000 MW- can we back down thermal power? We have to back down only solar – as we do in case of wind now. The economics of 19-21% CUF will go for a toss in this situation. Can protogonists of solar power explain this to me? I am unable to understand how AP,Telengana,,Rajasthan,Gujarat etc will do with 20-30GW each in next two years?

    I also do not understand the IRRs that you mention in your paper- 17.20% at a tariff of Rs 5.33 at 13% interest. Can you share the model publicly so that we understand your numbers?

    Paddy

    Reply
    1. Narasimhan Santhanam Post authorJanuary 30, 2016 at 3:36 pm

       Hi Paddy

       Many thanks for your kind comments

       I agree with some of them, but may be not all of them

       For instance, backing down for wind does not mean backing down for solar because wind generates most during Off Peak hours and many times in the middle of the night while solar can help genuinely in Peak Shaving

       On your wondering why banks should be any more keen to lend to the solar sector when the offtaker risk is the same, yes, I do agree with you on that point and this is precisely why many banks are asking for high collateral security

       On the IRR estimates, we have pretty much the same standard financial formulae that any financial account uses. While I will not be able to share my Excel spreadsheet here, I do request you to punch in reasonable assumptions on CUF, interest rates and capital cost, and you should be getting similar IRRs

       Hope it helps, and thanks once again for asking

       Reply
    2. Karthic February 6, 2016 at 2:35 pm

       Hi

       Banks should relax norms because solar is green power and the government wants to promote green power, and the banks should oblige

       Don’t you think it is a no brainer?

       Reply
12. Ravi Ramesh December 21, 2015 at 6:07 pm

    Can some one give the list of INdian banks that are providing loans for solar power plants? please also say which are the best banks that provide the lowest interest rates?

    Reply
    1. Mrityunjay January 31, 2016 at 11:47 am

       Many Indian banks – both nationalised and private banks – give solar loans today.

       Which bank is best for you usually is the bank that you already have relationship with. You have to negotiate with banks to get low interest rates, many of them will start with 12.5% and the rates will also depend on the credit rating of your company

       IREDA gives much lower interest rates today, so you should talk to them also

       Reply
    2. Narasimhan Santhanam Post authorFebruary 1, 2016 at 1:22 pm

       Mrityunjay has put it all so succintly that there is hardly anything for me to add.

       Yes to all that he has said,

       Reply
13. Vasantrao DESHMUKH December 24, 2015 at 6:04 am

    What about loans from US banks such as EXIM and also chinese trade development banks? Can we get loans from these at low rates?

    Reply
    1. Mrityunjay January 31, 2016 at 11:49 am

       You can get loans from trade development banks, but you should be buying components (especially panels) from that country to quality for low interest loan. Example is, if you want loan from EXIM bank, you should purchase solar panels from US companies like First Solar or Sunpower

       Reply
    2. Narasimhan Santhanam Post authorFebruary 1, 2016 at 1:27 pm

       If you are looking for loans from US trade development banks, you might also want to check out on http://www.opic.gov

       Reply
14. Venky Krishnan December 27, 2015 at 2:15 pm

    No point blaming the banks alone; unless the government supports them through the RBI and other sources, the banks can do little as they have their own mandates and pressures otherwise

    Reply
15. Jairam Sriram December 27, 2015 at 2:15 pm

    Solar was included in the priority sector many months back by the RBI but I dont think that has made any difference to banks’ willingness.

    Reply
    1. Mrityunjay January 31, 2016 at 11:50 am

       Banks have many other priority sectors other than solar, so they do not need to lend to solar in order to satisfy their priority sector lending mandates

       Reply
    2. Narasimhan Santhanam Post authorFebruary 1, 2016 at 1:29 pm

       Even assuming banks do give priority to solar loans, it might not mean much to interest rates – at best perhaps a half % reduction

       Reply
16. amarnath vikkum December 27, 2015 at 2:16 pm

    Dear sir

    For your information, many Indian banks are now giving loans to solar at or less than 12%. Earlier they were giving it only at 13%. I think this itself shows that Indian banks are more and more interested in solar financing

    Reply
    1. Narasimhan Santhanam Post authorJanuary 6, 2016 at 9:50 am

       Dear Amarnath

       Many thanks for your kind update

       Yes, I also came to know that since last few months, Indian banks are giving 12% and less for solar farms

       IREDA’s solar financing provides loans starting with 10.2% – http://www.ireda.gov.in/forms/contentpage.aspx?lid=740

       So, things are getting better by the day for solar power!

       Reply
17. Abhishek January 19, 2016 at 10:27 am

    Dear Reader
    Greetings for the Day
    I am Abhishek Sethia who is doing R&D on how to put up a Solar PV plant in Tamil Nadu/Telangana/Andhra Pradesh. We are planning to put up a plant of 1MW to 5MW depending on the area we get. If the company has got any project report or any experience which they can share would be grateful for me.
    If you got any information or any help which you can provide me, Kindly do the needful
    Hope to see a rpl from your side.
    With Warm Regards,
    Abhishek Sethia-9435592396

    Reply
    1. Narasimhan Santhanam Post authorJanuary 31, 2016 at 12:02 pm

       Abhishek

       I request you to send a note to Ramya Gopinath – ramya@solarmango.com ; at Solar Mango, we provide specialised assistance to companies such as yours setting up 1-5 MW solar power plants.

       Ramya can provide more details on how we can help.

       I look forward to hearing from you. and many thanks for your query and interest

       Reply
       1. anand sahu August 10, 2019 at 11:06 am

          dear sir,
          i go through your writings on solar power plant and find them much useful for beginners also.
          i am an individual and have arranged some 20 acres of land on lease from the government in chhattisgar. can i think of establishing a 5 mw solar power plant over there? i have only some theoretical knowledge in this regard. your kind assistance and counsel would highly be regarded.
          thank you
          contact number
          7989022091

          Reply
18. SP January 19, 2016 at 6:05 pm

    I checked with EXIM bank in USA they only provide loan if you buy solar inventory from US company , So question is which country has best high quality panel and which country.

    I hear china, Germany are best for solar panel and all people usually import from Germany .

    Any guidance on solar pv panel selection ?

    Reply
    1. Narasimhan Santhanam Post authorJanuary 31, 2016 at 12:09 pm

       Hi

       Yes, you need to purchase panels from US companies if you wish to qualify for loans from EXIM. Same is the case for other countries (you got to source from China for assistance from Chinese Dev Bank – http://www.cdb.com.cn/english/ )

       With all the top 5 solar panel makers ( in terms of GW of production) being from China, and also with almost all of them being in Tier 1 (high quality products), and with the Chinese panels being the most economical in the market, and with India having no anti dumping duties against Chinese panels, the decision on which country’s panels to go with is perhaps the easiest decision to make for an Indian solar power project developer today!

       Reply
19. Masthan Reddy January 24, 2016 at 2:46 pm

    How much collateral for Indian banks?

    Reply
    1. SP January 26, 2016 at 5:27 pm

       I checked with many bank all bank ask for 120% to 150% collateral and few were said based on PPA it could be 110% .

       SP

       Reply
       1. Narasimhan Santhanam Post authorJanuary 30, 2016 at 3:28 pm

          Dear SP & Masthan Reddy

          I agree that banks start off with 100+% collateral for solar farms, but I know for a fact that banks such as Andhra Bank have given these at collaterals less than 75% for Tamil Nadu PPA of Rs 7.01/kWh

          Reply
       2. Narasimhan Santhanam Post authorFebruary 3, 2016 at 5:02 am

          SP – also, just curious, which bank are you referring to that is asking for 150% collateral?

          I would suggest you Point out to the bank that many nationalized banks have started accepting collaterals of about 70% or even a bit less, and IREDA asks for hardly 30% collateral

          If your bank had already lent for solar projects, there is every chance they will significantly reduce the collateral as they already are aware of the key aspects, returns and risks for solar projects. The challenge will be if your bank has not loaned at all to solar projects. In this case, it could take quite some convincing before they come down on collateral and interest rates

          Reply
          1. SP February 3, 2016 at 5:19 am

             Hello Sir,

             I got 150% number from consultant, BTW IREDA with 30% collatral what is the interest rate , is this loan is available for new company ?

             Mixing 2 reply from another post. 9% ECB will be reducing balance loan or straight. In ECB people need to pay interest on whole money because you pay principal amount at end of the tenure which is Bullet Payment . In this case company need to save whole money till end of tenure and hence company can not use money to start another plant? Also tenure is usually 5 years only.

             What do you think ?

             3rd big concern for us is MAT. Due to MAT AD is not effective , What is your guidance from Financial model for this MAT 20% is big amount.

             Like SEZ Modi jee should put Solar out of MAT so people can really use 10 year Tax Holiday.

             Regards, SP

             Reply
             1. Narasimhan Santhanam Post authorFebruary 4, 2016 at 10:55 am

                Dear SP

                Many thanks for your comment

                I feel you should contact banks directly instead of approaching them through a consultant. I am confident that you will get collateral requirements at 100% or less.

                For IREDA, interest rates start at 10.2% and goes all the way to 11.4%, depending on the credit rating of your company (new companies and SPVs started for solar will have one of the lowest ratings, so they will most likely be eligible only for the highest interest rate)

                Hope this helps
             2. Kathy February 6, 2016 at 2:31 pm

                Why should any bank ask for 150% collateral? Why more than 100% – how does this make any sense sir?
20. Madhusudan January 24, 2016 at 2:47 pm

    For IREDA loans how much time will be taken for disbursement? Will there be bureaucratic delays?

    Reply
    1. Mrityunjay January 31, 2016 at 11:52 am

       IREDA loan disbursement is actually quite fast. While some will say IREDA is slow, it is not true in most cases, you can get the loan within 2 months from the time you apply

       Because IREDA was set up mainly to give loans for renewable projects, they have systems and processes that can expedite loan giving process for solar power projects

       Reply
       1. Narasimhan Santhanam Post authorFebruary 1, 2016 at 1:30 pm

          I agree with Mrityunjay. From what I have seen, on average, IREDA loans for solar power plants take less time than loan sanction and disbursement from other nationalized banks

          Reply
21. Ramesh Balsara January 24, 2016 at 2:49 pm

    Sir

    Why is the Indian govt not asking banks to lend at very soft interest rates for solar power plants?

    Reply
    1. Narasimhan Santhanam Post authorJanuary 31, 2016 at 12:00 pm

       Ramesh

       Good question

       I think the central government has started trying to do this, from what I understand

       I doubt you will get really soft loans at 5%, but for some sectors of solar, you might start seeing loans at about 10%. Now, this will most likely start off for the rooftop and offgrid solar sectors but hopefully there will be some reductions for MW solar as well.

       I also understand that the World Bank is giving $500 million loan to government, and through SBI, this loan will be provided for rooftop solar projects at interests much lower (2-3% lower than current interest rates for commercial borrowings…again, this is for rooftop solar projects, but I understand that there are some fundings that the World Bank is looking at giving to solar parks as well

       Stay tuned

       Reply
22. Mayura January 24, 2016 at 2:51 pm

    Dear Mr Narasimhan

    What types of assets can the banks take for collateral?

    Mayura

    Reply
    1. Mrityunjay January 31, 2016 at 11:53 am

       For banks, solar projects are no different from others

       Whatever collateral is acceptable for other projects, these are acceptable for solar power projects also

       Reply
23. HARISH KUMAR January 24, 2016 at 2:53 pm

    Sir

    Is it easier to get bank loans for captive solar power plants because here there is no question of payment defaults by the discoms?

    HK

    Reply
    1. Narasimhan Santhanam Post authorJanuary 31, 2016 at 12:05 pm

       Dear Harish

       Good question, but difficult to answer

       Because the banks might actually think the offtaker risk is higher for captive plants, as the offtaking company might not even exist for the project duration (say 20 years), whereas the government at least in some form is likely to exist for 20 years!!

       Reply
24. Kishore Selvam January 24, 2016 at 3:05 pm

    What do banks look for in a PPA before they decide to give loan for the Project?

    Reply
    1. Karthic February 6, 2016 at 2:34 pm

       First and foremost, who the offtaker of the power and the signatory of the PPA is, especially given the sorry financial health of our discoms

       Reply
25. Annie January 24, 2016 at 3:07 pm

    Can I get financing for solar power plants from international banks? What is the procedure to be followed?

    Reply
    1. Mrityunjay January 31, 2016 at 11:37 am

       Direct international financing for small solar power plants will be difficult, international financing is possible mainly if the borrower has a fairly large balance sheet and has significant history of having borrowed from international sources

       But with the $ against Re being so volatile, international borrowing is also risky today

       Reply
       1. Narasimhan Santhanam Post authorFebruary 3, 2016 at 4:45 am

          Totally agree with Mrityunjay

          He is making my job really easy by answering many questions here, and actually answering them much better and more concisely than I could ever have!

          Thank you Mrityunjay, and take care

          Reply
26. Birendra das January 24, 2016 at 3:09 pm

    Can a EPC help me in getting a loan from a good bank for my solar power project?

    Reply
    1. Narasimhan Santhanam Post authorJanuary 30, 2016 at 3:45 pm

       Dear Birendra

       Thanks for your interesting and useful question

       I would answer it from two perspectives

       1. Any lending by a bank is provided mainly on the basis of your project and your (developer) profiles. While both project and personal profiles are important, most solar lending today is recourse based, which implies that banks are fully relying on your project alone to ensure they are paid back interest and principal. From this perspective, one can say that an EPC can make little difference to a solar project lending as it is you the developer that the bank is more interested in than the project per se.

       2. At the same time, project characteristics are important too – especially who the offtaker of the power is and how well the power plant has been implemented so it lasts for 25 years. For the latter, having a high quality EPC with you can make a difference as it gives the banks that extra confidence that the project is in safe hands.

       Given the above two angles, EPCs do try assisting solar farm owners to get bank assistance, but I would say they can only have a limited influence

       Hope my answer was of help

       Reply
       1. SP January 30, 2016 at 5:30 pm

          Sir,

          Any of your client used ECB Automatic route to raise money at 2% ?

          Would like to know real time experience and pro n cons.

          SP

          Reply
          1. Narasimhan Santhanam Post authorFebruary 3, 2016 at 4:39 am

             SP

             ECB is in theory available at about 2.5% – LIBOR + 0.5%+1% for LC could indeed come to 2-2.5%

             But this does calculation does not take into account the interest premium charged by Indian banks for exchange rate cover.

             It works like this:

             An international bank could in theory be interested in lending to you (through your bank’s LC) at LIBOR + 0.5%, which could come to about 1.5% for a 3 year loan. Indian banks typically charge about 1% as LC charges. Thus, the total comes to 2.5%.

             Now, if you just take the above route, you have to Pay the Indian bank in $ for the loan you have taken from the international bank. Which means, if the rupee depreciates much further against the $, you will end up paying a lot more in rupees than just the 2.5% interest.

             Now, this exchange rate risk is not something many developers would like to take. Instead, they go for an exchange risk cover premium. In this route, your bank charges an interest which can be considered as a premium you pay; under this, you pay to the bank only in rupees, and so you would be paying only 2.5% interest in rupees.

             But this exchange rate cover interest could be as high as 7% depending on the duration of the loan etc; this could go even higher the way rupee is behaving against the $

             So, you have two choices:

             You take the exchange risk on your head and pay to your bank in $, and the interest is only 2.5% – but if Re depreciates swiftly against the $, you could end up paying a real lot more.

             Or you take the exchange rate cover and pay in Rs, so you pay bank only 2.5% for the loan itself, but the exchange rate premium interest increases the effective interest rate to 9.5%-10%. But here, you are sure about what your exposure is.

             Your choice is thus between: [2.5% + exchange rate risk] OR [9-9.5% and no exchange rate risk]

             Not an easy choice to make, but that’s there is in front of you right now in the context of ECB loan.

             Reply
          2. Ram Mittal February 7, 2016 at 7:02 am

             Dear SP

             I agree with Mr Santhanam

             The overall cost of an ECB loan will be much higher than the 2% you state. Once all costs and risk coverages are considered, it will be at least 8%, closer to 9%

             Now, if you do not wish to take the exchange risk cover, it could be theoretically be about 3%, but then if you factor in the Probabilities connected to increased rupee outflow owing to depreciation, it might come to the same 8-9%

             Besides, ECB route is very difficult for loan amounts lower than $25 million, in fact the sweet spot might be $50 million and above for the lenders…

             Hope this helps

             Ram

             Reply
             1. SP February 7, 2016 at 9:42 am

                I removed ECB from my business model as till 5 year i need to save profit to give bullet payment and hence I can’t grow my company
27. Mrityunjay January 31, 2016 at 11:35 am

    ECB is difficult for small projects

    Reply
    1. Narasimhan Santhanam Post authorFebruary 1, 2016 at 1:21 pm

       Agreed. Totally.

       Small scale solar power developers, while they might all want it, will find it very difficult to get ECB (External Commercial Borrowings) or international loans in simple words.

       Reply
28. SP January 31, 2016 at 6:14 pm

    Buying land :- for plant developer need to buy Land , but for putting the electrical pole from plant to Grid Do SPD need to buy land from each land owner . Is it SPD ‘s responsibility to buy small small land for each pole . ?

    How this works when putting transmission line might be some farmer reduse to sell small land ?

    SP

    Reply
    1. Narasimhan Santhanam Post authorFebruary 1, 2016 at 2:40 am

       This is indeed a nagging issue, and it is termed the Right of Way issue – that is, getting the rights to having your transmission poles and overhead wires on other peoples’ lands – usually farmers’ lands.

       Some times, if you are lucky, your transmission line will need to go only along the main road, in which case the Right of Issue will not be a concern, but where it crosses many farmers’ lands, you will need to get the consent of the farmers.

       No, you don’t have to buy those lands!, but you need to get their consent. In most cases, this involves paying them some incentives; usually, you go through the panchayat head of the respective villages and he will work out something for you.

       This process can be a bit messy and in some cases, could take a while, so do keep this in mind while planning your solar power plant – there have been cases where solar farm construction had gotten seriously delayed because the farmers got over ambitious and the developer had to negotiate hard and long to get them to agree on a reasonable incentive.

       Reply
29. Vikram Rastogi February 4, 2016 at 10:33 am

    I read about loans given by IREDA based on external grading. Who is responsible for this and how can we get the best grading?

    Reply
    1. Brijesh February 7, 2016 at 6:55 am

       I think they are referring to the ratings given by independent agencies such as CRISIL or ICR\A

       Reply
30. Bhaskar Bhatt February 4, 2016 at 10:35 am

    Dear Sir

    I want to go for buyer’s credit for my solar panels. But I understand the process is long and the savings might not be huge. Does securing a buyer’s/suppliers credit mean I can have added savings on my loan repayment amount?

    I plan to put up a 3 MW solar power plant in Karnataka

    Reply
    1. Karthic February 6, 2016 at 2:37 pm

       Well, the rather volatile re vs $ situation might play spoilsport, otherwise I think buyer’s credit can give you some decent savings over direct bank loans

       Reply
    2. Mahesh February 7, 2016 at 10:34 am

       Dear Sir,
       We are intigetor rooftop and ground mounted pl send details on mail greenenergypl @gmail.com
       Thanks
       Mahesh ganpate

       Reply
31. Manohar Jain February 4, 2016 at 10:36 am

    I am keen on knowing more about when to start the bank loan process for a solar power plant.

    Suppose I have a PPA, when should I start to apply for a loan? Should it be the EPC who does it on my behalf or can I apply for it from my side?

    Reply
    1. Narasimhan Santhanam Post authorFebruary 6, 2016 at 5:36 am

       The best time to start working on a bank loan is when you are fairly sure you will get a PPA and not after you have got a PPA

       You might ask whether the banks will do anything without your PPA; true, the banks will not start the loan process unless you show a PPA, but even before any bank starts this process, you might want to check with multiple banks on the best terms they can give, and have these insights ready before you start working a bank in full steam.

       Such exploratory would could take some time, and why not do it before you get a PPA if you are sure or almost sure of getting one, so that the duration between the PPA signing and the actual loan sanction is reduced?

       Reply
32. Birender February 4, 2016 at 10:39 am

    Hi, this is Birender Das here

    Sir, I want to know Is it possible to secure 100% loan financing for a solar power plant?

    Reply
    1. Narasimhan Santhanam Post authorFebruary 4, 2016 at 10:49 am

       Dear Birender

       Many thanks for your question, quite an ambitious one I must say

       Well, the very best you can expect from Indian banks even in theory is 80:20 (80% debt and 20% equity), but in most cases the best you can expect is 75:25.

       Now, it is quite possible that your bank might accept a slightly higher project cost than the actual and sanction the loan, in which case your effective debt:equity might tend towards 80:20

       Unless your bank is very generous in accepting a much higher than actual project cost (they are not supposed to), please be ready to bring in a minimum of 20% of the total project cost as equity.

       I doubt 100% loan is possible in any country’s banking system – sorry to disappoint you!

       Reply
33. Dinesh Venky February 6, 2016 at 2:29 pm

    Sir

    You can get 100% loan maybe if you are taking loan from friends or relatives

    But from banks, 100% of project cost in loans is not possible in India

    Reply
    1. SP February 6, 2016 at 5:26 pm

       even in US also, it is difficult after 2008 meltdown

       still bank rates are near zero .. and talk are it might go in negative like Japan

       Reply
       1. Dinesh Venky February 7, 2016 at 7:05 am

          Dear SP

          Many thanks for your reply to me

          Can you tell us at what interest rates solar power plants in the US are getting funded?

          Thank you

          Dinesh

          Reply
34. Kathy February 6, 2016 at 2:30 pm

    Why you want to take 100% loan?

    You have to pay so much back along with high interest 🙁

    Reply
    1. Dinesh Venky February 7, 2016 at 7:09 am

       Thank you Kathy for your remark

       I agree bank loans are costly but if I am not able to bring in the equity component (if I simply do not have enough assets or cash!!), what is the alternative except 100% loan?

       Dinesh

       Reply
35. Ajit ostwal May 18, 2016 at 6:39 pm

    Hello all,
    I am looking for 50mw to 200mw plant across india.
    Existing or alotted eith govt ppa.
    Mail me on a.a.ostwal@gmail.com

    Reply
36. Brian March 2, 2017 at 9:09 am

    @Narasimhan We are based in Europe and want to lend Euro 200,000 @ 6% for a solar project to an Indian company for repayment in 7 to 8 years as an ECB. How to go about it? Thanks in advance.

    Reply
    1. bhaskar September 6, 2017 at 3:47 am

       Mr.Brian , can you share your contact details

       Reply
37. Neha December 28, 2017 at 11:55 am

    Hi,

    Can you confirm if working capital loan availed by Solar module manufacturer and EPC player is classified under PSL as per RBI guidelines or not?

    Reply
38. Shiva Kumar B J January 15, 2018 at 6:00 pm

    Sir, please help me I would like to generate solar power plant in my 5 acre land please give me full details of how to start solar power plant and what is the cost in 5 acre land solar project also bank loan details and your contact number also…. Please sir

    Reply
39. Abhishek Bapat March 7, 2018 at 7:52 pm

    Hi,

    I would like to understand the payment terms for a Solar loan?

    1. Is it an amortized loan? i.e. a fixed payment like e.g. a car EMI.

    2. What is the payment schedule like? e.g. Quarterly/annually?

    3. Is it an Interest only with a balloon principal payment at the end?

    I want to understand how will the payment terms affect my cash flows?

    Regards,
    Abhishek.

    Reply
40. Satyejitt Dalvi January 30, 2019 at 7:57 am

    Hello Sir,

    I want to set up a 50Kw roof top solar plant on my Society can you please provide me a funding bank or finance institution phone number.

    Reply