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National Solar Mission loans at 5% does not violate base rate norms: Reserve Bank of India(RBI)

As readers of Panchabuta are aware,  Ministry of New and Renewable Energy (MNRE) has formulated a scheme on financing of off-grid and decentralised solar (Photovoltaic and Thermal) applications as part of the Jawaharlal Nehru National Solar Mission(JNNSM).

The scheme provided for routing the capital subsidy and the interest subsidy on bank loans availed by the clients from the banking system for solar energy conversion/ user systems and devises under this scheme through National Bank for Agriculture and RuralDevelopment (NABARD). “The Capital Subsidy – cum- Refinance Scheme for installation of solar off-grid (photovoltaic & thermal) and Decentralised Applications” is being introduced to enable the banking system (Commercial Banks and RRBs eligible for drawing refinance from NABARD) to avail of the financial resources including the subsidies on behalf of their borrowers for creation of relative assets.

All Commercial Banks (including private commercial banks) and Regional Rural Banks which are eligible to avail of refinance facilities from NABARD would be covered under this scheme subject to their satisfying the eligibility criteria for refinance as may be stipulated by NABARD from time to time. Funds towards meeting the subsidy and refinance requirements under the scheme would be provided to NABARD by IREDA.

There have been discussions in the recent past whether funding at 5% constituted any kind of violation of the base rate rules of the RBI under which no loans except few exceptions can be offered below the base rate of a bank.

Now according to this report, the Reserve Bank today said banks financing power generation equipment under the Jawaharlal Nehru National Solar Mission (JNNSM) at a concessional 5 per cent interest rate is not violation of norms. This financing below the base rate would not be considered violation of guidelines, RBI said in a statement.
“We advise that such lending at interest rates not exceeding five per cent per annum where refinance of Government of India is available, would not be considered to be a violation of our Base Rate guidelines,” it said.


  1. rajesh chaurasia

    Nationalised banks and other Private banks should avial the facility of refinnce and lauch appropriate scheme to finance the Solar Pv and Soalr thermal equipments and publicise the same through print and electronic media to join hands with the nation in promotion of renewable sources of energy.

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