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

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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