SwitchON Foundation has partnered with Punjab National Bank for the promotion of solar pumps. A First Loss Default Guarantee Fund will be set up by SwitchON Foundation through which Punjab National Bank will be financing solar pumps.
“This partnership is extremely important in creating an ecosystem for encouraging large scale deployment of solar pumps. It is perhaps a first of its kind agreement between a private not for profit organisation with a leading public sector bank to set up a Guarantee Fund, which is otherwise, usually set up by Governments” said Vinay Jaju, Managing Director of SwitchON Foundation.
Guarantee funds are set up to improve project bankability and reduce lender’s risk perception – such arrangements have been set up by the Ministry of MSME to increase lending for small business . In this unique arrangement the guarantee fund is being set up to facilitate financing of solar pumps for unbankable small marginal farmers without having to offer any collateral – which will lead to meeting countries energy security, reduction in emissions and improving farmers income.
Because of the guarantee fund’s comfort, the leading public sector bank is offering a longer than usual payback period of 7 years. It comes with a zero down payment for up to 1.6 lakhs of loan for small and marginal farmers.
Previously, SwitchON partnered with RBL and Axis Bank to sanction loans for over 100 solar pumps, but it is the first time that a Nationalized Bank has come forward for the financial partnership. There has been zero Non-Performing Assets (NPA) till date and farmers have seen a 1.6x rise in income after the adoption of solar pumps.