India's Central Bank Eases Base Rate Rules for Alternative Energy Projects

India’s central bank eased rules on lending to off-grid solar power projects, saying banks will be permitted to extend subsidized loans to programs such as village lighting schemes.

Banks can provide loans to such projects at a subsidized interest rate of as much as 5 percent of which 2 percent can be refinanced with the government, the Reserve Bank of India said in a notice on its website.

The base rate, or minimum rate at which a bank is permitted to lend, ranges from 7.25 percent to 9.5 percent, according to Bloomberg data. The base rate of the State Bank of India, the nation’s biggest lender, is 8.25 percent.

Borrowers setting up off-grid projects under the National Solar Mission are eligible for the subsidized rate, the notice said. These projects include solar lighting systems for villages, standalone photovoltaic and thermal power plants that provide electricity to rural areas unconnected to the grid, and other heating, cooling and power installations that can replace equipment currently running on diesel.

India’s Solar Mission aims to set up 20,000 megawatts of solar capacity by 2022, including 2,000 megawatts of off-grid applications. Under the first phase, it plans to install 200 megawatts of off-grid solar capacity by 2013, according to the Ministry of New and Renewable Energy.

To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.

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