Energetica India Magazine May-June 2021

FINANCE a great need for increasing the number and size of such institutions. Moreover, with IREDA’s gross NPA’s of 10% and top 20 borrowers accounting for over 35% of its loan book, it shows a relatively high degree of concentration risk. This degree of concentration risk is also no- ticeable in the lending by commercial banks. For instance, facilities extended by Asian Development Bank and other multilateral institutions for financing of the roof-top segment were primary driv- en by SBI and PNB in India. Both these banks concentrated the lending on top 20 developers in India, thereby ensur- ing a high degree of concentration risk. Even on the utility scale, the same prac- tice has been followed. The concentration of the loan portfolio in 15-20 developers creates two major issues. One, it provides for a high de- gree of concentration risk. Second, the development of the Renewable sector is left in the hand of these developers. Their pace of growth invariably decides the growth of the sector and their finan - cial performance invariably decides the quality of the loan book. Hence, there is a need to diversify the loan book of the banks and multilateral agencies from the top developers. We need to provide avenues for the HNIs, retail investors to invest the sector and gets access to finance. In short, there is an urgent requirement for democratisa- tion of renewable energy in the country. For example, when an industry goes for solar roof-top loan in India, they may be asked to provide their land, their dogs, and even their clothes as collateral. This makes it obviously unattractive for them to invest into such projects. The lending needs to focus on addressing such seg- ment, or even smaller developers. What about the savings of middle class? Funds in societies? Fund that are com - pletely not utilised? We need to get them to invest in rooftop solar. Moreover, we need a more robust and holistic regulatory framework and signif- icant push from the Government. In the latter half of 2020, RBI revised it Priority Sector Lending (PSL) norms to double the limit to 30 crore. However, if we look at Bank portfolios, renewable energy holds a minor portion. Smaller develop- ers and households opting for renew- able energy hold an even tinier por- tion of that. There is enough space for growth and increased funding provided specialized institutions for Renewable Energy financing are setup with backing from the central government and RBI. Some measures such as first loss guar - antee from the central government can do wonder in boosting credit. However, it will be important to ensure the bene- fit is taken up only by the under-served segments such as MSME’s and house- holds. Our recent collaborations with US and UK, who have both been frontrunners in the space, can assist with access to wider low-cost finance pool and devel - opment funds. Coupled with favourable domestic policies and regulations that attract domestic retail investors and foreign investors, we can turn the clock around and ensure we do not have to ponder over these challenges on cli- mate financing in the coming years. I im - plore the Government to act quickly and now. The urgency of India’s need for cli- mate financing to tackle climate change is real and the consequences too grave to ignore. 47 energetica INDIA- May-June_2021