Analysing the Determinants of Access to Green Credit in India

Abstract The study examines the determinants of access to green credit in India, addressing the limited evidence that jointly considers firm-specific and macroeconomic factors in an emerging market context. Using an unbalanced panel of 673 firm-year observations from 194 green companies over 2015–2025, the study employs fixed-effects panel regression with robust standard errors. The short and highly unbalanced time dimension, resulting from substantial data limitations and reporting inconsistencies in the Indian corporate sector, restricts the availability of valid instruments and degrees of freedom, making dynamic GMM estimation unsuitable; therefore, a fixed effects panel regression is employed. The results show that transaction costs, firm size, liquidity, profitability and leverage significantly influence access to green credit. Larger green firms and projects benefit from lower transaction costs and greater access to finance, while profitability and liquidity are associated with lower reliance on external credit. Consistent with Transaction Cost Economics, the findings indicate that transaction costs constitute an important barrier to green credit access in India, particularly for smaller green companies. The study contributes to the literature by integrating firm level characteristics and macroeconomic conditions to examine access to green credit in India, during post-Paris Agreement period. The study highlights the need to reduce transaction costs for greater access to credit for green companies and provides policy insights for promoting a more inclusive green-finance ecosystem in India. JEL Classification: Q50, Q54, G20, G21, G30