New Delhi scrambles to reassure investors and states on green push

India’s renewable energy ministry has moved to calm markets after reports that lenders were being told to pause new funding for solar and wind projects. In a weekend statement, the ministry said it had issued no advisory instructing banks or financial institutions to halt or slow approvals for clean energy loans. Officials argued that any miscommunication may have stemmed from internal discussions on better tracking project performance and bad loans, not from a policy shift away from renewables. The clarification comes as India courts billions of dollars in foreign and domestic investment to meet ambitious targets for solar, wind and green hydrogen capacity by the end of this decade.

The timing of the confusion was particularly sensitive. Project developers say they already face delayed payments from state-run power distribution companies, land acquisition hurdles and grid bottlenecks that make investors nervous. News that banks might be quietly tightening the tap risked pushing up financing costs and delaying auctions, just as India promotes itself as a major clean manufacturing hub for solar modules, batteries and electrolyzers. By publicly stressing that no blanket advisory exists, New Delhi is trying to reassure both lenders and developers that bankable renewable projects remain a priority, while signalling that it expects better risk assessment and project vetting rather than indiscriminate lending.

Behind the scenes, the episode highlights the complexity of India’s energy transition. The country still relies on coal for the bulk of its power generation, and coal-heavy states remain wary of moving too fast toward variable renewables without clear backup and grid plans. Central ministries have been nudging states to sign longer-term contracts for clean power and to honour purchase commitments, even when spot market prices dip. At the same time, banks burnt by past infrastructure loans are under pressure from regulators to maintain asset quality. The result is a delicate balance: New Delhi wants more green projects on paper and on the ground, but it also wants to avoid a new wave of stressed assets that could attract political backlash.

Internationally, India’s clarification will be watched by climate negotiators and investors who see the country as a pivotal player in global decarbonisation. New Delhi has framed its green transition as both a development strategy and a climate obligation, arguing that stable policy signals are critical to crowd in capital. Any perception that the government is pulling back from renewables could strengthen critics who say emerging economies are still hedging their energy bets. By moving quickly to deny that it ordered a funding pause, the renewable energy ministry is attempting to preserve its credibility ahead of key investment forums and future climate summits. The larger question remains whether India can align state utilities, federal ministries and the banking system fast enough to turn headline targets into reliable gigawatts on the grid.