Solar power is all the rage, but something is troubling banks

clean energy ministry in December urging banks and other lenders to be cautious on financing new solar photovoltaic module manufacturing capacity. Adding to the sector’s woes is a preliminary 126% tariff recently imposed by the US, which threatens to choke off its primary export market and worsen an already growing domestic capacity glut.“We are now quite cautious on lending to this industry.

In fact, I would even go to the extent of saying that we might not finance any new solar module companies for the time being,” a senior official at a non-bank lender told Mint on the condition of anonymity.Lenders are intensifying due diligence to avoid a potential wave of bad loans. Bankers are now scrutinizing promoter track records and the specific "end use" of funds to ensure projects remain viable despite falling global prices and trade barriers.A second banker made similar observations, highlighting the increased scrutiny his bank is undertaking when lending to new solar module plants.“Solar module manufacturers have mushroomed in India, while demand is much lower than supply.

Banks are therefore looking much more closely at loan proposals and doing deeper due diligence,” the banker said. “We are scrutinising all such projects to check viability, what the antecedents of the promoters are and what the end use of the funds will be for.”The ministry of new and renewable energy said on 7 December it had shared details of current installed domestic manufacturing capacity across various segments of solar photovoltaic panel production with the Department of Financial Services under the finance ministry, as well as non-banking financial companies (NBFCs) such as Power Finance Corporation (PFC), REC Ltd, and the Indian Renewable Energy