Indian Renewable Energy Development Agency Ltd (IREDA), the state-run shadow bank whose shares have risen four-fold since last year’s listing, plans to form a subsidiary to help finance small businesses and retail customers seeking to set up rooftop solar and bioenergy projects or buy electric vehicles, its chairman has said.
Many small and micro businesses planning renewable projects such as rooftop solar, waste-to-energy, bioenergy projects or e-mobility “are not getting proper banking support,” IREDA chairman Pradip Kumar Das told ET.
IREDA sees this as an opportunity to ensure fund flows to those segments deprived of financing and expects its intervention to help develop the sector, Das said. “Since we have expertise in this field and are mandated to acquire expertise in new and emerging areas, we want to come into this field.”
IREDA is essentially a project finance company, and catering to small businesses and retail customers would require a “different mindset, system and process”, Das said, explaining the need for a subsidiary to undertake the new business. “In the umbrella company, we don’t want to mix things up.”
The proposed subsidiary will not directly lend to retail customers or small businesses. It will work with microfinance firms or other non-banking finance companies that are “domain experts” in certain segments or geographies, Das said.
Directly lending to retail customers would be difficult for the firm until full control mechanisms are in place, Das said, adding that it wasn’t “prudent” for a non-banking finance company (NBFC) to lend to another, but this was required to support the customer segment that doesn’t get adequate banking support.
Emphasising that this model can work, Das cited the example of a ₹150-crore loan IREDA made one-and-a-half years back to another NBFC for e-rickshaw purchases. About 74,000 e-rickshaws were financed as the two NBFCs worked together to bring down the average borrowing cost for rickshaw owners to 17.6% from about 28-34% in the past.
