The success of Bank of Baroda’s (BoB) Rs 10,000 crore green infra bond issuance, the first such issuance from an Indian bank, is expected to encourage other banks to tap the space as well. In addition, it marks a major step in the renewable lending space and sustainable finance, experts said.
According to sources, banks such as Union Bank of India and Indian Bank are already evaluating this strategic option after seeing the strong demand in Bank of Baroda’s issuance.
Market Impact
The issue saw bids totalling Rs 16,415 crore—more than triple the base size of Rs 5,000 crore. It secured a competitive cut-off coupon of 7.10%, offering a ‘greenium.’ It got a spread of 38 basis points (bps) over the 10-year government bond compared to the typical spread of 60-70 bps.
“With the rising focus on environmental sustainability, banks continue to scale up their exposures to the renewable energy sector, which is one of the key growth areas. The sector’s rapid expansion is attracting sustained capital inflows, with banks actively capitalising on the opportunities,” said Sachin Sachdeva, vice president & sector head – financial sector ratings, ICRA.
Bank lending to the renewable segment has been on the rise. State Bank of India sanctioned Rs 1.34 lakh crore as of December 2025 for renewable projects. Union Bank of India’s renewable portfolio grew 35% year-on-year (YoY) to Rs 16,442 crore, whereas Punjab National Bank sanctioned Rs 14,479 crore. On the other hand, credit extended to petroleum, coal products, and nuclear fuels has moderated to14.5% in February compared to 19% a year ago, according to the Reserve Bank of India (RBI) data.
“The funding for renewables is in the right direction, as energy security is a top priority. The dependency on fossil fuel will reduce over time due to geopolitical oil risks, necessitating the evolution of renewables-which, in turn, demands greater funding,” said Vivek Iyer, partner and financial services risk leader, Grant Thornton Bharat.
Scaling Renewable Lending
He added that infra green bonds enable pure long-term borrowings for lending, avoiding banks’ asset-liability mismatches—making them a prudent funding choice for renewable energy space as these are longer projects.
India aims to produce 500 gigawatts from non-fossil sources by 2030 and has achieved more than 50% of its cumulative electric power capacity as of now. Experts indicate the target remains achievable if the country sustains its current pace. This growing momentum leads banks to anticipate strong sector expansion and to fund those projects.
“Demand in other sectors remains subdued, but this area offers lenders significant opportunities. Moreover, there is a government push. Bank of Baroda’s issuance has given a sense of what price the market will take, and this will encourage further such issuances,” said a senior official at a public sector bank.
Another public sector banker said that he expects a double digital-credit growth from this space. He added that they are also considering to tap both domestic as well as overseas market to fund these opportunities
“Public sector banks will bet big on renewables—historically dominant in infra lending. Over the next 3-5 years, I expect them to dive in and green bond issuances to pick up. Renewables offer huge opportunities amid the energy transition, as capital demand far exceeds supply, spurring banking involvement. As the transition happens, you may actually see the broader banking ecosystem getting into consortium lending arrangements as well,” Iyer said.
Experts noted that banks need to be very calculated about the exposures towards renewable energy projects as the segment is still new and are longer in nature.