India’s Green Transition Will Be Financed on the Ground — and NBFCs Hold the Key
By
Shri V. P. Nandakumar,
Chairman and Managing Director, Manappuram Finance Ltd
India’s green transition gets talked about mostly in terms of big infrastructure — solar parks, hydrogen missions, metro expansions. These matter, but they’re only part of the story. The other part, which doesn’t get nearly as much attention, is what happens at the ground level. Electric two-wheelers in small towns. Rooftop solar for households. Energy-efficient equipment in small workshops. This is where the real volume of the transition plays out, and it’s also where NBFCs have a genuine role to play.
India’s climate commitments are capital-intensive by nature. But the problem isn’t just about raising large amounts of money. It’s about getting that money to the right borrowers — small, often informal, often first-time — who don’t fit neatly into the banking system’s comfort zone. NBFCs have spent years building exactly this kind of reach. Their presence in semi-urban and rural markets, combined with more flexible underwriting — rooted in relationship-based lending, proximity to borrower cash flows, and lighter regulatory constraints relative to scheduled banks — gives them an advantage that larger banks simply aren’t in a position to replicate.
Take electric mobility. Policy incentives have done their part on the supply side, but financing is still the real bottleneck for adoption. A delivery rider in a tier-2 city or a small fleet operator isn’t going to walk into a bank and come out with a loan easily. NBFCs can underwrite these borrowers and structure products around their actual cash flows. The same applies to rooftop solar — households and small businesses need customised solutions, not off-the-shelf loan products.
There’s also a funding angle that’s easy to miss. Green finance opens up access to global capital pools. International investors are increasingly looking for credible, sustainable assets in emerging markets, and India is increasingly prominent in that conversation. NBFCs that build genuine ground-level green portfolios — however granular — are not operating in isolation. Aggregated, these portfolios represent exactly the kind of impact-at-scale that institutional green investors seek. Those that can show genuine impact, proper measurement, and alignment with recognised frameworks can tap into green bonds, sustainability-linked loans, and concessional lines from development finance institutions. In a sector where borrowing costs directly affect margins, this isn’t a small thing.
That said, it’s not a straightforward path. EV financing, for instance, requires an understanding of residual values, battery degradation, and what the secondary market actually looks like — none of which traditional underwriting models were designed for. Rooftop solar and energy efficiency upgrades have their own evaluation challenges. And without a clear national green taxonomy, the risk of greenwashing — reputational and regulatory — is real.
Building capability will take time and deliberate investment. Sector-specific underwriting, partnerships with OEMs and technology providers, stronger ESG reporting — these aren’t things that happen overnight. Regulatory clarity on disclosure norms and risk frameworks will help, but NBFCs can’t wait for that to arrive before getting started. In the interim, there is meaningful ground to cover independently: developing internal green classification frameworks aligned to international standards such as the Climate Bonds Taxonomy, investing in borrower-level data collection to enable impact reporting, and engaging with peer institutions to establish shared benchmarks. Several NBFCs have already begun this work quietly, and their early experience will shape how the broader sector approaches the opportunity. The institutions that invest in this infrastructure now will be better positioned — both operationally and reputationally — when formal regulatory standards eventually arrive.
The broader point is this: large infrastructure projects define the scale of the transition, but the actual outcomes depend on millions of smaller decisions. Switching to an EV. Putting up a solar panel. Replacing an old machine with something more efficient. NBFCs are better placed than most to finance those decisions — and in doing so, they’re not just lending, they’re enabling a shift in behaviour at a scale that matters.
The green transition is a real business opportunity. For NBFCs willing to build the right capabilities, it’s one worth moving on quickly. This is also, ultimately, a fiscal policy question. India’s green transition cannot be financed by public expenditure alone — the fiscal space simply isn’t there. Strategic imperatives for reimagining India’s fiscal framework must therefore include creating the conditions under which private capital, channelled through institutions like NBFCs, can do the work that government balance sheets cannot. That means green taxonomy development, targeted credit guarantees, tax treatment of green instruments, and blended finance structures that de-risk first-mover institutions. When fiscal policy is designed with this in mind — not just as a revenue and expenditure exercise, but as an enabler of directed private capital — the transition becomes both faster and more fiscally sustainable.
Pic Courtesy: pegasus photography/ images are subject to copyright
