India: Commercial Banks Give Priority to Solar Water Heater Loans

Solar water heaters have been made a priority in several loan programmes of well-known banks in India. For example, Bengaluru-based Canara Bank has granted more than 25,000 loans for individual solar water heaters so far and has given out loans worth INR 60 million in the solar heating and cooling sector. The Bank of Maharashtra has seen more than 15,000 borrowers over the last two years and has financed solar thermal systems worth INR 7.5 million. According to the bank’s Assistant General Manager, R Harikumar, business has been picking up since in July 2012, the Reserve Bank of India (RBI) included solar water heaters in the list of priority sectors for loans disbursed through commercial banks (see Article 6.6 of the guidelines).
Photo: Malaviya Solar Energy Consultancy

Mangal Akole, former President of the Maharashtra Solar Manufacturers Association (MASMA), says: “It had been the long-standing demand of manufacturers from Maharashtra to make solar loans part of priority sector lending and the implementation of the scheme will continue to boost business.” Loan programmes are especially suitable for the urban market, because all potential clients have a bank account.

Priority sector lending is a support policy in India for sectors which influence large parts of the population, as well as for employment-intensive sectors, such as agriculture. Under the priority section, the banks are given certain targets to be achieved for the total amount of loans spent. As a result, certain banks have aggressively promoted solar water heaters. The following table shows the Canara Bank requirements for solar loans. Other national and selected cooperative banks have implemented similar schemes.
 

No

Parameters

Solar Water Heater

1

Purpose

Purchase & installation

2

Eligibility

Salaried individuals, associations, small businesses,
industrial premises, hospitals, hotels, etc

3

Quantum of Loan

Not exceeding 80% of the project costs (of which
40% will be covered by a grant from the national
subsidy scheme)

4

Client´s participation

20% of project costs

6

Rate of Interest

No

Type of Borrowers

Solar Water Heaters

1

Domestic users

12.25%
(base rate + 2%)

2

Institutions and
commercial users

13.25%
(base rate + 3%)

7

Repayment

Branches may agree on an amount in consultation
with the borrower (not exceeding 5 years)

10

Types of systems and
unit size

  1. System of any capacity
  2. System needs to adhere to benchmark costs
    for water heating systems set by MNRE
  3. Only requires reference to actual costs as
    per proforma invoice / quotation
  4. Subsidy available to the extent of
    permissible models financing up to 400 litres
    per day

Bank requirements for solar energy systems under priority sector lending 
Source: Canara Bank

This text was written by Jaideep Malaviya, an expert in solar thermal based in India (malaviya@solrico.com)
 

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