MNRE Flags Module Overcapacity, Urges Banks to Prioritise Funding Upstream Solar Components
The Ministry of New and Renewable Energy has urged banks exercise caution in funding new solar PV module manufacturing project and advised banks to prioritise funding for critical upstream segments such as polysilicon, ingots, wafers, solar glass and other ancillaries to strengthen India’s solar manufacturing value chain.
December 06, 2025. By Mrinmoy Dey
India’s installed solar module manufacturing capacity has reached nearly 150 GW, including about 122 GW listed in the Approved List of Models and Manufacturers (ALMM), MNRE said in a notification. This volume, the ministry highlighted, is 200–250 percent higher than the current domestic requirement, with total capacity expected to cross 200 GW in the coming years.
The ministry’s communication follows concerns raised by the All India Solar Industries Association (AISIA) in August 2025. AISIA warned that module manufacturing capacity has grown to nearly four times annual demand, and that unchecked lending could create unsustainable debt burdens and potential non-performing assets (NPAs) in the banking system. The association urged that banks increase due diligence before funding additional module or cell projects.
While module capacity is oversupplied, the ministry noted an uneven picture across the value chain. India currently has about 27 GW of solar cell manufacturing capacity – slightly below present demand – but this too is projected to exceed 100 GW within next few years surpassing domestic needs as new projects come online.
In sharp contrast, upstream segments such as polysilicon, ingots and wafers remain severely underdeveloped, with only about 2 GW of ingot and wafer capacity and no commercial polysilicon production in the country, the ministry highlighted.
MNRE has therefore recommended that banks and non-banking lenders prioritise financing for integrated manufacturing facilities, especially those covering upstream stages. It also underscored the need for greater support to ancillary components such as solar glass (15 GW domestic capacity) and aluminium frames (17 GW capacity), where demand–supply gaps persist.
The memorandum urges the Department of Financial Services (DFS) to issue appropriate guidance to banks, NBFCs, and renewable-energy lenders such as PFC, REC and IREDA. The ministry stressed that lending decisions must align with market realities and long-term sectoral trends to ensure financial sustainability.
AISIA, in its letters to MNRE and the Indian Banks’ Association (IBA), has similarly called for a Bank Lending Advisory Note, cautioning against speculative capacity creation and encouraging balanced funding across the solar value chain.
The advisory comes at a time when India’s solar manufacturing sector is rapidly scaling under domestic manufacturing schemes, even as demand uncertainty and pricing pressures challenge operational viability for many players.
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