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RBI Increases Lending Limit for Renewable Energy Projects Under Priority Sector Lending

The Reserve Bank of India (RBI) has raised the priority sector lending (PSL) limit for the renewable energy sector, effective April 1, 2025. This move aims to increase financial support and boost liquidity for clean energy projects.

Key Changes in PSL Guidelines

• Bank loan limits for renewable energy projects have been increased to Rs35 crore.
• Public utilities, including street lighting systems and remote village electrification, are now eligible under PSL.
• Loan limits for individual households remain at Rs0.1 crore per borrower.

Impact on the Renewable Energy Sector

• The revised guidelines will increase liquidity, potentially leading to lower interest rates for renewable energy projects.
• Agricultural solar projects—such as solar-powered pumps and farm-based solar installations—remain covered under PSL.

Background & Industry Insights

• The last PSL revision in September 2020 had doubled the loan limits for renewable energy projects, capping it at Rs30 crore.
• Parliament’s Standing Committee on Energy (2023) suggested introducing Renewable Finance Obligations (RFOs) for banks to ensure a set percentage of lending is directed toward renewables.
• At the C&I Clean Energy Meet (Chennai), experts highlighted the increasing availability of clean energy loans, with collateral-free loans up to Rs100 crore at ~10% interest.

This policy shift is expected to drive higher investments in solar, wind, and biomass energy, supporting India’s clean energy transition.