HOW AI IS TRANSFORMING LOAN APPROVAL AND UNDERWRITING FOR GREEN FINANCE

• Published on Sep 17, 2025
• Read Time 5 mins
• 

What if getting a loan for your rooftop solar was as easy as ordering food online? Thanks to AI, this is becoming a reality in India

Why Traditional Lending Falls Short

For decades, loan approvals in India relied heavily on paperwork, collateral, and credit scores. According to the Reserve Bank of India (RBI), nearly 40% of Indians do not have a formal credit history, making it difficult for them to access loans (RBI Financial Inclusion Report, 2022).

Here are some types of loan seekers who miss out:

• Small business owners in rural and semi-urban areas
• First-time borrowers for green energy projects
• Individuals without formal income proof

Traditional underwriting could take days or even weeks and often exclude borrowers who were actually creditworthy but lacked conventional documentation.

How AI Is Changing the Game

AI-powered underwriting uses machine learning models to analyze a much wider range of data, not just credit scores. This includes:

Digital payment history (UPI, mobile wallets)

• Utility bill payments
• Business transaction data
• Social and behavioral patterns

By processing these data points in real time, AI can generate instant risk scores and recommend loan approvals within minutes.

A NITI Aayog report on AI in financial services (2021) notes that AI can reduce loan processing time by up to 90%, while improving accuracy in risk assessment.

AI in Green Loans & Solar Financing

One of the most exciting applications is in sustainable lending, especially solar financing.

Traditionally, lenders hesitated to finance rooftop solar projects because repayment depended on energy generation, which could vary.

Now, AI models can:

• Predict solar energy output based on location, weather patterns, and panel efficiency.
• Adjust loan terms dynamically to match expected savings on electricity bills.
• Offer customized interest rates for solar panel financing and solar rooftop loans.

For example, Tata Power Solar and several NBFCs are using AI-based tools to assess project viability and reduce risk for both lenders and borrowers.

AI in EV Financing

Electric vehicle (EV) adoption in India is growing rapidly, EV sales rose by 49% in FY 2024 (Society of Manufacturers of Electric Vehicles). But financing remains a challenge, especially for two-wheelers and three-wheelers in smaller cities.

MSMEs and AI-Powered Lending

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy, contributing nearly 30% to GDP (Ministry of MSME, 2023). Yet, a World Bank study found that the MSME credit gap in India is over $330 billion.

AI is helping bridge this gap by:

• Automating loan application processing.
• Using GST data, e-invoices, and bank statements for instant credit scoring.
• Integrating with government schemes like CGTMSE to offer collateral-free loans.

Some lenders now offer MSME loan application online portals where AI instantly tailors offers based on the applicant’s profile, cutting approval times from weeks to hours.

Responsible AI & Regulation in India

While AI brings speed and inclusion, it also raises concerns about bias, transparency, and data privacy. India is actively working on regulatory frameworks:

• Digital Personal Data Protection Act, 2023 governs how lenders can use customer data
• IndiaAI Mission promotes ethical AI development and deployment.
• AI Centers of Excellence are set up in partnership with industry and academia to ensure fairness and accountability.

Internationally, India has signed the India–France AI Roadmap to collaborate on safe and responsible AI (Ministry of Electronics & IT, 2023).

The Road Ahead

In the coming years, we can expect even more innovation in AI-powered lending:

• Dynamic loan pricing – Solar loan interest rates linked to actual energy output
• Usage-based EV finance – Loan terms based on real-time vehicle performance data
• Hyper-personalized MSME credit offers – Auto-generated by AI in seconds

With these advancements, AI is paving the way for a future where green loans, rooftop solar loans, EV finance, and MSME business loans are not only fast and efficient, but also fair and inclusive.

FAQs

Are there specific loans (for solar, EV, or MSMEs) that benefit most from AI underwriting?

Solar financing – AI models predict solar energy output from location, weather, and panel specs, tailoring loan terms and rates accordingly. For example, Ecofy customizes EMIs to be less than the electricity bill

EV financing – AI can extend quick financing options for two- and three-wheelers, especially useful in smaller cities.

MSME loans – AI evaluates GST records, e-invoices, and bank statements to offer instant, collateral-free credit tailored to business profiles.

How is Ecofy making green loans more accessible?

Ecofy focuses on financing rooftop solar, EVs, and MSMEs, and uses technology-led processes to make approvals faster and more customer-friendly.

How can AI improve EV financing in India?

By evaluating repayment capacity using real-time usage and transaction data. Ecofy’s strong presence in EV financing means such innovations could benefit borrowers in smaller towns.

Sources:

Reserve Bank of India – Financial Inclusion Report 2022

NITI Aayog – Responsible AI for All, 2021

Ministry of MSME – Annual Report 2023

Society of Manufacturers of Electric Vehicles – EV Sales Data FY 2024

Ministry of Electronics & IT – IndiaAI Mission & India–France AI Roadmap 2023

World Bank – MSME Finance Gap Report, 2023