Transitional Foreign Exchange Debt Platform: Paths to Enable Foreign Currency Debt to the Rooftop Solar Sector in India

This case study by the Climate Policy Initiative (CPI) proposes a 'Transitional Foreign Exchange (FX) Debt Platform' to enable foreign currency debt for the rooftop solar sector in India. It addresses the barriers that prevent small-scale project developers from accessing foreign capital, primarily the risks associated with currency fluctuations and the inability of these developers to access commercial hedging instruments due to poor credit profiles.

• The Indian government has set a target of 40 GW of rooftop solar installations by 2022, but low access to debt capital is a primary barrier to achieving this goal. As of March 2016, the installed capacity was only 0.7 GW.
• Small-scale rooftop solar developers face significant barriers to using foreign currency debt because they cannot access common hedging instruments. Cross-currency swaps are unavailable due to the high counterparty credit risk associated with developers who have poor credit ratings and lack credit history. Long-only options are too costly and have tenors (5-7 years) that are too short for typical loan durations. Structured options are restricted by Reserve Bank of India (RBI) regulations to listed companies or unlisted companies with a minimum net worth of INR 2 billion.
• The proposed 'Transitional Foreign Exchange Debt Platform' routes foreign currency debt from the Overseas Private Investment Corporation (OPIC) through a local Indian private sector financial institution. This intermediary borrows in USD and lends to project developers in INR, managing the FX risk through its own treasury or financial markets. To mitigate risk, OPIC provides a credit guarantee to the intermediary against borrower default.
• Because the landed cost of INR debt to the intermediary (estimated between 11.95% and 12.45%) often exceeds domestic benchmark rates, the platform requires donor grants from philanthropic sources. These grants subsidize the cost to ensure loans to borrowers are made at rates linked to domestic benchmarks, such as the 11.5% rate seen in the IREDA – KfW Renewable Energy Program.
• The Transitional FX Debt Platform is estimated to be highly efficient in mobilizing capital, with every $1 of public donor grant capital enabling between $17 and $34 of additional foreign debt for the solar rooftop sector.
• Several alternative structures were considered but found unsuitable for the specific OPIC case: Alternative A (public sector intermediary) is precluded by OPIC's mandate to lend only to the private sector; Alternative B (foreign intermediary) faces challenges with donor grant availability and due diligence; and Alternative C (direct borrowing with a backstop guarantee) is rejected by donors due to the potentially limitless nature of unfunded guarantees.

APA

Atal, V., Purkayastha, D., & Shrimali, G. (2018). Transitional Foreign Exchange Debt Platform: Paths to Enable Foreign Currency Debt to the Rooftop Solar Sector in India. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/06/Transitional-Foreign-Exchange-Debt-Platform_Paths-to-Enable-Foreign-Currency-Debt-to-the-Rooftop-Solar-Sector-in-India-1.pdf

Chicago

Atal, Vinit, Dhruba Purkayastha, and Gireesh Shrimali. Transitional Foreign Exchange Debt Platform: Paths to Enable Foreign Currency Debt to the Rooftop Solar Sector in India. Climate Policy Initiative, 2018. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/06/Transitional-Foreign-Exchange-Debt-Platform_Paths-to-Enable-Foreign-Currency-Debt-to-the-Rooftop-Solar-Sector-in-India-1.pdf.

Wikipedia

{{cite report |last1=Atal |first1=Vinit |last2=Purkayastha |first2=Dhruba |last3=Shrimali |first3=Gireesh |title=Transitional Foreign Exchange Debt Platform: Paths to Enable Foreign Currency Debt to the Rooftop Solar Sector in India |publisher=Climate Policy Initiative |date=June 2018 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2018/06/Transitional-Foreign-Exchange-Debt-Platform_Paths-to-Enable-Foreign-Currency-Debt-to-the-Rooftop-Solar-Sector-in-India-1.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{atal2018transitional, author = {Atal, Vinit and Purkayastha, Dhruba and Shrimali, Gireesh}, title = {{Transitional Foreign Exchange Debt Platform: Paths to Enable Foreign Currency Debt to the Rooftop Solar Sector in India}}, institution = {Climate Policy Initiative}, year = {2018}, month = jun, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2018/06/Transitional-Foreign-Exchange-Debt-Platform_Paths-to-Enable-Foreign-Currency-Debt-to-the-Rooftop-Solar-Sector-in-India-1.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }