The Indian government’s rooftop solar initiative offers households a path to free electricity. The PM Surya Ghar Muft Bijli Yojana provides subsidies, and applicants may require loans to cover the remaining expenses. Understanding which banks offer loans can impact the cost of going solar.
How the Subsidy Works
The government subsidy covers 60% of solar system costs for installations up to 2 kilowatts, dropping to 40% for additional capacity between 2 and 3 kilowatts. At current benchmark pricing, this translates to Rs 30,000 for a 1kW system, Rs 60,000 for a 2kW system, and Rs 78,000 for a 3kW system or larger.
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Loans under the scheme carry interest rates around 7%, calculated as 0.5% above the prevailing Repo Rate set by the Reserve Bank of India. Since the Repo Rate currently stands at 6.5%, the effective rate sits at 7%. If the RBI reduces the Repo Rate, borrowers would see their interest costs drop automatically.
State Bank of India
SBI provides loans specifically for solar rooftop installations up to 3kW capacity. The bank requires a minimum 10% margin contribution from the borrower. Security is held through hypothecation of the solar equipment, and processing fees are waived entirely.
Maximum borrowing is capped at Rs 2 lakhs with a repayment window of up to 120 months, including a moratorium period. The interest rate is currently set at 7%, calculated as EBLR minus 2.15%. Funds are disbursed directly to the vendor or EPC contractor after feasibility reports are submitted as required by the Ministry of New and Renewable Energy. Early repayment carries no penalty.
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Canara Bank
Canara Bank’s offering follows similar structural parameters but differs in interest rate calculation. The Canara Rooftop Solar scheme under PM Surya Ghar offers floating rates at 7% based on RLLR minus 2.25%, while fixed rate options sit at 7.75%. The bank also requires the same 10% minimum margin and holds hypothecation over the equipment purchased.
Loan amounts reach a maximum of Rs 2 lakhs including the subsidy component, with tenures extending to 10 years. Disbursement follows the same model as SBI, with funds going directly to the vendor after loan documentation is complete. The scheme applies to residential on-grid systems only, up to 3kW capacity.
Union Bank of India
Union Bank of India offers loans for solar rooftop installations under the PM Surya Ghar Muft Bijli Yojana. Maximum loan amount is Rs 2 lakhs. Interest rates are set at EBLR minus 2.25%, currently working out to 7% annually on a reducing basis. Processing charges are nil.
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Comparing the Three
All three banks offer comparable interest rates hovering around 7%, matching the scheme’s intended affordability. The maximum loan amounts align at Rs 2 lakhs for systems up to 3kW. Processing fees are uniformly waived. The primary differentiators lie in eligibility requirements and margin conditions.
Interest calculations vary slightly—SBI uses EBLR minus 2.15%, Canara uses RLLR minus 2.25%, and Union Bank uses EBLR minus 2.25%—but all result in the same 7% effective rate at present.
