India’s leading state-run financial institution, Power Finance Corporation (PFC) Ltd, finds itself in the spotlight over a significant unpaid loan issue involving Gensol Engineering Ltd, a company that was funded to support India’s electric vehicle (EV) ecosystem. The situation, now under legal and internal scrutiny, has raised major concerns around due diligence and fraud detection in green energy financing.

Background: The ₹633 Crore EV Leasing Deal

In January 2023, PFC sanctioned a substantial funding package of ₹633 crore to Gensol Engineering. The goal? To finance the leasing and procurement of 6,000 electric vehicles (EVs) intended for BluSmart Mobility, a ride-hailing startup focusing on electric vehicles.

Out of the sanctioned amount:

• ₹587 crore was meant for 5,000 electric four-wheelers,

• ₹46 crore was sanctioned for 1,000 electric three-wheelers, intended for cargo operations.

However, the three-wheeler loan component was never availed, according to the statement issued by PFC.

Unpaid Dues Surface in 2025

As of April 18, 2025, only ₹45 crore had been repaid out of the disbursed ₹352 crore, leaving ₹307 crore as principal outstanding. PFC noted that until January 31, 2025, Gensol was making repayments on schedule. But signs of stress began showing when Debt Service Reserve Account (DSRA) funds had to be invoked to service repayments in February and March of the same year.

This sudden deterioration in repayment discipline raised red flags within the PSU lender and its risk monitoring systems.

Ratings Downgrades and Document Falsification

The situation worsened after credit rating agencies CARE and ICRA flagged issues with Gensol’s submitted documentation, which they labeled as “falsified.” This led to a downgrade in Gensol Engineering’s credit rating, shaking investor confidence and placing further pressure on lenders.

PFC, in response, clarified that it did not issue any of the letters cited by the agencies and has initiated a probe under its Anti-Fraud Policy.

Complaint Filed with Economic Offences Wing

In a major move, PFC has lodged a formal complaint with the Economic Offences Wing (EoW) regarding the alleged forgery of documents submitted by Gensol. The financial institution has stressed its commitment to recovering the dues, safeguarding public funds, and upholding transparency in operations.

“Considering these red flags, the matter is under investigation internally under PFC's Anti-Fraud Policy,” the statement added.

The legal escalation highlights PFC’s serious approach to tackling fraud and ensuring that its public mandate in promoting energy infrastructure is not compromised by non-compliant borrowers.

BluSmart Mobility’s Involvement

The original intent behind the funding was to enable BluSmart Mobility, a clean-tech focused ride-hailing startup, to expand its EV fleet. However, with the loan now turning sour, questions are being raised about the oversight and execution of the tripartite relationship between PFC, Gensol, and BluSmart.

There is currently no official comment from BluSmart Mobility, but the company may come under regulatory lens as investigators look into how the funds were utilised.

PFC’s Share Performance and Investor Sentiment

Despite the brewing controversy, shares of PFC closed 0.5% higher at ₹438.25 on Tuesday, albeit still far from its 52-week high of ₹580. Investors appear to be cautiously optimistic due to the proactive steps taken by the company, but market analysts warn that prolonged delays in recovery could affect future credit ratings and fund disbursements.

Policy Implications for EV Financing

This incident may push government-backed lenders and private financial institutions to reassess their risk frameworks in green financing, especially as India ramps up its EV adoption and clean mobility targets.

Experts suggest that going forward, stricter due diligence protocols, auditable fund utilization records, and real-time fleet deployment tracking must be implemented for all electric vehicle leasing programs.

Conclusion: A Wake-Up Call for Sustainable Lending

The Gensol-PFC episode serves as a reminder of the risks in fast-expanding sectors like electric mobility. While government incentives and institutional support are vital to achieving India’s green goals, they must be backed by robust risk management and fraud prevention mechanisms.

As the investigation continues, stakeholders across the industry—from PSUs and startups to regulators and investors—will be watching closely for outcomes that could reshape how EV infrastructure projects are funded in India in the future.

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