India’s Rooftop Solar Goals Slowed by Loan Delays

Why It Matters

Financing delays undermine India’s renewable‑energy ambition, risking higher coal consumption and missed climate targets. The issue highlights systemic gaps between policy incentives and on‑ground execution.

Key Takeaways

• Loan approvals lagging, slowing rooftop solar deployment
• PM Surya Ghar targets unmet: 2.36M vs 4M installations
• State utilities hesitant, fearing revenue loss
• Banks demand collateral, increasing borrower costs
• Delays risk higher coal dependence by 2030

Pulse Analysis

India’s aggressive rooftop solar push reflects a broader strategy to decarbonise its power sector, yet the gap between policy design and implementation is widening. The PM Surya Ghar programme offers generous subsidies and a streamlined vendor‑financing model, aiming to democratise clean energy for millions of households. However, the scheme’s reliance on bank‑driven loans has exposed weaknesses in credit assessment and documentation standards, causing a backlog of applications and a rejection rate that varies sharply across states. This financing friction not only stalls installations but also erodes consumer confidence in government‑backed renewable initiatives.

Banking institutions cite risk mitigation as the primary reason for stringent loan conditions, including collateral demands for amounts as low as 200,000 rupees and exhaustive paperwork to protect public funds. Such requirements disproportionately affect lower‑income homeowners and small‑scale vendors, who often lack pristine title documents or a flawless electricity payment history. The resulting delays inflate project timelines and increase overall costs, undermining the subsidy’s intended affordability. Moreover, state‑owned utilities, wary of revenue erosion from off‑grid rooftop generation, have been slow to champion the programme, further dampening demand.

If unresolved, these financing hurdles could force India to lean more heavily on coal, jeopardising its 500 GW clean‑energy target and international climate commitments. Policymakers may need to standardise documentation, introduce credit guarantees, and align utility incentives with renewable adoption to restore momentum. Strengthening bank‑government collaboration and simplifying loan processes could unlock the latent demand, accelerate rooftop solar deployment, and cement India’s role as a global leader in renewable energy transition.

India’s rooftop solar goals slowed by loan delays

By Sudarshan Varadhan, Gopika Gopakumar and Jatindra Dash

Singapore/Mumbai/Bhubaneswar — Indian Prime Minister Narendra Modi’s push to accelerate the rollout of rooftop solar power is falling short of targets despite heavy subsidies due to loan delays and limited support from state utilities, vendors and analysts say.

The shortfalls represent the latest challenge to India’s efforts to nearly double clean energy capacity to 500 GW by 2030 and come as the government plans to suspend clean energy tendering targets amid a mounting backlog of awarded projects yet to be built.

Challenges to plans to increase solar uptake may mean India maintains its reliance on coal‑fired power.

India’s ministry for new and renewable energy created its subsidy programme for residential solar panel installations in February 2024, covering up to 40 % of the costs.

But residential installations at 2.36 million are well below the ministry’s target of 4 million by March, according to data from the programme’s website.

“Banks’ reluctance to lend and states’ hesitance to promote the schemes could derail India’s efforts to transition away from coal,” said Shreya Jai, the lead energy analyst at research firm Climate Trends in New Delhi.

Roughly three in five rooftop solar applications filed on the scheme’s website are yet to be approved while about 7 % have been rejected, according to government data on the programme, known as the PM Surya Ghar.

Pending applications

In a statement about the pending applications, the renewable energy ministry pointed to accelerating installations, which have benefited more than 3 million households, and said the scheme enables state‑owned utilities to reduce subsidy payouts to keep residential power bills in check.

“The loan rejection rate varies across states,” the statement said.

Under PM Surya Ghar, consumers apply and select a vendor who handles paperwork and arranges bank financing for solar panels. After loan approval and installation, the vendor submits proof, after which the government subsidy is credited to the bank.

However, banks have been rejecting or delaying loans for numerous reasons including lack of documentation, which they said is necessary to protect public funds.

“We are working with the government to push for some standard documentation, because it is necessary to avoid bad loans. Currently if loans go bad, banks can take away these panels but what will we do with these panels?” said a senior official at a major government‑owned bank.

Chamrulal Mishra, a solar vendor in the eastern Indian state of Odisha, said applications are often rejected because the customer has missed electricity payments or because land records are still in the name of deceased relatives.

Utility ownership

Residents there dispute the claims that they have missed payments, which they attribute to administrative errors after a change in utility ownership decades ago.

A spokesperson for India’s Department of Financial Services, which regulates the country’s banks, said they have responded to consumer feedback to allow co‑applicants for loans to clear up title claims and the simplification of documentation requirements.

The Renewable Energy Association of Rajasthan said some banks are making collateral demands for loans under 200,000 Indian rupees (≈ $2,208), despite scheme guidelines not requiring them to, which is constraining solar‑power additions.

State Bank of India and Punjab National Bank, some of the country’s largest lenders, did not reply to requests for comment on the matter.

State‑owned utilities are also not promoting rooftop solar as much, as they are concerned about the loss of revenue as sales move off the electric grid.

“Wealthier households typically have high electricity consumption, tariffs and reliable roof access. When they shift from the grid it leaves a larger financial burden,” said Niteesh Shanbog, an analyst at Rystad Energy.