SwitchON signed an MOU with PNB for Solar Pump Financing through Loss default guarantee fund

On April 10, 2021, SwitchON Foundation has partnered with Punjab National Bank(PNB) to offer finance to the marginal farmers for buying solar pumps.

• PNB will be financing solar pumps through the SwitchON Foundation’s – First Loss Default Guarantee Fund.

Objective: The basic aim of this fund is to help unbanked small marginal farmers without any collateral and to promote clean energy.

First of its kind agreement:

• It is a first of its kind agreement between a private non-profit organisation and a public sector bank to set up a Guarantee Fund (usually guarantee fund will be set up by the Government)
• PNB is offering a payback period of 7 years 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 along with a Nationalized Bank for the financial partnership.
• There have been zero Non-Performing Assets (NPA) to date and farmers have seen a 1.6x raise in income after the adoption of solar pumps through SwitchON.

Features of the Partnership:

• This partnership will be helpful to reduce greenhouse gas emissions, conserve natural resources and enhance the quality of life of marginal farmers.
• It will also accelerate the achievement of the official target of the central PM-KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan) Scheme of India is to achieve 30.75 GW of solar energy generation by 2022.

The First Loss Default Guarantee Fund:

• The first loss guarantee is a mechanism whereby a third party compensates lenders if the borrower defaults i.e. (insurance against a loss).
• This clause makes the lender financially responsible for any loan losses up to a certain percentage (decided, upfront, based on the perception of risk), which typically ranges between 8-20% of the portfolio.
• The guarantee fund is set up to reduce lender’s risk – such arrangements are already have been set up by the Ministry of MSME to increase lending for small business.

Recent Related News:

On March 16, 2021, Punjab National Bank (PNB) set up a wholly-owned subsidiary named PNB Cards & Services Ltd to provide the non -financial support services related to the credit card business of the bank.

About SwitchON Foundation

Establishment –  2008
Office Location – Kolkata, West Bengal
Managing Director – Vinay Jaju

About Punjab National Bank(PNB):

Founded – May 19, 1894
Commenced Operations –  April 12, 1895
MD & CEO – CH. S. S. Mallikarjuna Rao
Headquarters– New Delhi, India
Tagline– The name you can bank upon