What changed
RBI clarified that lending at interest rates not exceeding 5% per annum under the MNRE's Off-Grid and Decentralised Solar applications scheme, backed by 2% refinance from GoI, will not violate base rate guidelines. This exemption applies to loans extended to entrepreneurs under JNNSM.
What it means for you
Banks can now offer subsidised solar loans below their base rate without regulatory penalty, provided GoI refinance is available. This encourages lending to renewable energy projects while maintaining compliance. Lenders must ensure the 5% cap and refinance condition are met to avoid base rate violations.
What you must do
- Verify that loans under this scheme carry interest ≤5% per annum and have GoI refinance of 2%.
- Ensure loan documentation clearly references the JNNSM scheme and refinance availability.
- Monitor that no other loans are priced below base rate without similar exemptions.
- Train lending staff on this specific exemption to avoid inadvertent base rate breaches.
Who it affects
All scheduled commercial banks (excluding RRBs), Entrepreneurs seeking financing for off-grid solar applications, Branches handling renewable energy lending
Does this exemption apply to all solar loans?
No, only loans under the MNRE's Off-Grid and Decentralised Solar applications scheme under JNNSM, with interest ≤5% and GoI refinance, are exempt from base rate guidelines.
What happens if the refinance from GoI is not available?
Without GoI refinance, the loan would be subject to standard base rate guidelines, and pricing below base rate would be a violation.
Are RRBs covered by this circular?
No, the circular explicitly excludes Regional Rural Banks (RRBs).