The new power transmission system will be made up of 1,850 kilometres of transmission lines, three 400 kilovolt substations and nine 220 kilovolt grid substations. It will be mainly located in western Rajasthan,
The funds will also be used to boost the transmission capacity of seven existing substations.
Rajasthan Renewable Energy Corporation, the state's renewable energy agency, says that there is 2.7GW of wind capacity installed in Rajasthan. The organisation is aiming to reach 8GW of wind and solar generation capacity by 2018.
The weakness of India's grid has been a barrier to generation in the country, with bottlenecks having caused a number of projects to stand idle. In 2012, the government announced plans to create "green-energy corridors" with an investment of around $8 billion.
Len George, energy specialist in ADB's South Asia department said: "The proposed transmission investments will support evacuation of energy produced in large renewable energy parks that bring in economies of scale compared to smaller stand-alone renewable energy projects."
The government of Rajasthan and state transmission utilities will provide further financing of around $300 million to compliment the ADB loan. The investment program is expected to be completed by early 2018.