Renewable energy projects may get exclusive funding from banks

Banks may soon consider a separate sectoral limit for projects related to renewable energy sources.

Renewable energy’s share in the total installed electricity generation capacity is about 12 per cent. Its sources include biomass, small hydro power, wind power and solar power. The sector is estimated to add 18,500 MW of capacity.

At present, renewable sources form part of the entire power sector for determining sectoral exposure in bank advances, with each bank internally determining the cap.

The issue of separate sectoral limit came up for discussion during a meeting between the Finance Minister and the chiefs of public sector banks and financial institutions on March 18.

Crowding out

“Banks have a tendency to provide finance to conventional power projects or projects having generation based on conventional fuel such as coal and gas. This has led to crowding out of finance for the renewable energy sector,” a senior Government official told Business Line.

 

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