Indian banks funded over Rs 6,000 crore of coal expansion plans: Report

Indian commercial banks—such as State Bank of India, Kotak Mahindra Bank, ICICI Bank, and Axis Bank—have collectively provided over Rs 6,000 crore in loan and underwriting services to companies with active coal expansion plans, finds a report released on Thursday.

The Centre for Financial Accountability released its annual Coal vs Renewables Investment report, showing project finance lending to renewable energy projects increased by over 60% in 2023, whereas for a third consecutive year, there was no project finance lending to new coal power projects.

“We’ve consistently seen an increase in project finance to solar and wind power projects. This shows there is investor confidence in renewable power projects. However, since we expanded the scope of this report this year to include corporate finance, we note a significant lending coming in from the US to companies engaged in coal power expansion in India,” said Joe Athialy, Executive Director of Centre for Financial Accountability.

While the report shows a decline in project finance for coal power projects, the data gathered showed over Rs 25.000 crore in corporate finance lending to coal power projects. Most of this lending was in the form of underwriting services provided by US-based financial institutions, such as Jefferies Financial Group, to Adani and JSW Energy.

Jefferies Financial Group, a US-based financial institution, provided more than Rs 25,000 crore in underwriting services to JSW Energy and Adani in 2023. It’s the only US-based financial institute that provides corporate finance to coal-lined companies in India.

“While Western countries have been dilly-dallying on increasing climate finance for the developing world, its private sector seems to be lending to companies currently engaged in coal power expansion,” added Athialy.

Corporate finance is not tied to specific assets and, hence, does not necessarily fund coal expansion projects directly. However, companies generating most of their revenue from coal often use additional financing to expand their coal power assets.