SELCO Incubation Centre 1

FINANCING FOR OFF- GRID

SOLAR HOME LIGHTING SYSTEMS
A GUIDE FOR SOLAR FINANCING PROCEDURES WITH
REGIONAL RURAL BANKS AND OTHER INSTITUTIONS
SELCO Incubation Centre 3
Eighteen years of SELCOs innovation is entirely
dedicated to the sta members who have
continuously improvised and experimented
on making solar technology aordable /
maintained / utilized by the under-served
communities. If not for the drive of the SELCO
sta members we would not have been able
to see how a technology which is nearly ve or
ten times a familys income or rather the second
highest investment in their life after their house
can be utilized by them.
We dedicate the series of manuals comprising
of Solar Technology, Sales & Marketing and
Financial linkages for solar products which
documents SELCOs work, to all of its sta
members which has reached 220+ individuals.
We thank the training team at SELCO headed by
Jagdeesh Pai & Sudhir Kulkarni for their guidance
on the structure of the manual. We also thank our
colleagues Sathyanarayan B, Ramanath N Dixit
(consultants for nancial institution relationships
Acknowledgements
at SELCO both former bankers and hence
have pertinent observations on the schemes
operative and the procedures for the same)
and Surabhi Rajagopalan (part of the SELCO
Foundation managing the policy initiative). We
would like to thank Sameera Mushini, a graduate
from Institute of Rural Management Anand who
authored the rst draft for the manual. Lastly,
we also thank and acknowledge our funding
partners for recognizing and supporting us
GIZ, The Swiss Agency for Development and
Cooperation (SDC), Doen Foundation and Asian
Development Bank: Energy for all.
The spirit and objective of these manuals
are to serve as guiding principles for the new
enterprises which will emerge from the SELCO
Incubation Centre across India. This is part of
an initiative to make SELCO an open source
organization which wants to spread its business
process and principles available to one and all
to make its mission reach far and wide.
Index
1. Acknowledgements .................................................3
2. Introduction ..............................................................6
3. Solar Financing: Structure and Design .................7
3.1 How do we determine if the customer needs
nancing? ............................................................................................ 7
3.2 How do we determine if the customer can aord the
equipment even if nanced? .................................................. 7
3.3 How should nancing be designed for the
customer? ............................................................................................ 7
3.4 Financing Institutions................................................................... 8
4. Banks .............................................................................9
4.1 History of Banks in India and their Role ............................ 9
4.2 Banks and Solar nancing ...................................................... 10
4.3 Benets accruing to banks from lending for Solar
home lighting system ............................................................... 10
4.3.1Categorized under Priority Sector lending: ................ 10
4.3.2 Dierential Rate of Interest (DRI) scheme targets: 10
4.3.3 Credit access under nancial inclusion: ....................... 10
4.3.4 Renance from NABARD: ...................................................... 11
4.3.5 Claiming carbon credits: ....................................................... 11
4.3.6 Corporate Social Responsibility (CSR) funds: ............ 11
4.3.7 Ensuring repayment through promotion of
livelihoods, rural betterment: ............................................... 11
4.4 Who is eligible for Financing? .............................................. 12
4.5 What are the pre-requisites, conditions and
requirements for granting the loan? ............................... 12
SELCO Incubation Centre 5
4.5.1 Loan Proposal ............................................................................... 12
4.5.2 Appraisal of the Proposal ...................................................... 13
4.5.3 Technical Aspects....................................................................... 13
4.5.4 Legal Aspects ............................................................................... 14
4.5.5 Repayment Capacity................................................................ 14
4.5.6 Sanctioning Authority............................................................. 14
4.5.7 Documentation & Disbursement .................................... 14
4.5.8 Rate of Interest ............................................................................ 14
4.5.9 Service Charges .......................................................................... 15
4.5.10 Security .......................................................................................... 15
4.5.11Surety/ Guarantor .................................................................... 15
4.5.12 Repayment .................................................................................. 15
4.5.13 Classication .............................................................................. 15
4.6 Borrower Assessment - Checkpoints ............................... 15
Table 1: Check points for assessing the customer ............ 16
4.7 What are the Dos and Donts while lling the form
for a loan? ......................................................................................... 16
Table 2: Documents required by Customers ........................ 17
Table 3: Bank documents to be executed by the banker/
customer/guarantor .................................................................. 17
Table 4: Documents from the Supplier/ Enterprise .......... 17
Table 5: Documentation required for SHGs .......................... 17
Table 6: Documentation required for Joint Liability
Groups (JLGs) ................................................................................. 17
4.8 When does the bank reject nancing? .......................... 18
4.9 How can the service provider help the bank in the
process of recovery? .................................................................. 18
4.10 Does Government of India provide support? ............ 18
5. Other Financing Mechanisms ................................ 20
5.1 For nancial inclusion of extremely poor
communities, how can grant amount be utilized? 20
6. Jawaharlal Nehru National Solar Mission (JNNSM) 23
What is the objective of JNNSM? ................................................. 23
What are the mission targets of JNNSM?................................ 23
6.1 Capital Subsidy Scheme .......................................................... 24
6.1.1 What are the objectives of the scheme? ..................... 24
6.1.2 What are Margin Money, Loan Period and Rate of
Interest on Loan? ......................................................................... 25
6.1.3 Security & Monitoring ............................................................. 25
6.1.4 MNRE pre approved Models ............................................... 25
6.1.5 What is the process of getting subsidy from the
bank? ................................................................................................... 26
7 Annexure................................................................. 27
7.1 Credit Approval Note .................................................................. 27
7.2 Claim Form ....................................................................................... 28
7.3 Capital Subsidy Form ................................................................. 31
7.4 Frequently Asked Questions ................................................. 33
8. Conclusion .............................................................. 35
9. Bibliography ........................................................... 36
2. INTRODUCTION
It is widely accepted that solar photovoltaic
technology is the most promising solution to
the energy crisis the world is facing today. But
this technology has to reach the end user in a
way that is most benecial; otherwise there is a
great danger of the technology being rejected
by the public. Already in many places, where
very cheap but low quality renewable energy
products are being distributed among rural
population, and where products have failed
due to lack of service, the technology is being
viewed negatively. Nothing can be more detri-
mental to society than to be led to believe that
renewable energy technology is worthless. The
right way forward is to ensure that people are
made aware of the benets of renewable en-
ergy, and the best way possible to access and
use it in their daily lives. The method suggested
here may require more time and eort on the
part of the suppliers of renewable energy, but
this is necessary to encourage people to switch
to using renewable energy.
First, for each customer segment that is tar-
geted, all the current activities that use en-
ergy, and the expenditure currently incurred
for the same should be analyzed
Next, it should be studied if there are other
activities of this customer segment where
energy access can improve their lives signi-
cantly
Based on this, diferent technical solutions
should be designed and the lifetime cost of
each of these solutions should be studied.
Lifetime cost and not initial cost should be
evaluated. Lifetime cost also includes service
costs
Once this is known, it should be checked if
the solution with least lifetime cost is aord-
able by the customer
If it is not, the most suitable type of fnancial
linkage that would make the expense in-
curred worthwhile for the customer should
be worked out
If the solution with least lifetime cost does
not seem feasible from the customer view-
point in near future, then the next solution
should be considered
This is the normal approach when solutions are
provided in cities and other well-served towns.
But in remote and under-served regions, the
tendency is to distribute the cheapest products
without any eort being put in to study the best
and sustainable solution, often for fear of the ef-
fort not being protable. One of the key factors
that can bring about a change in this mindset is
to learn about the dierent options of nancial
linkages available or that can be created in re-
mote and under-served areas.
SELCO has, by utilizing nancial linkages avail-
able in Karnataka, run as a commercial entity
with social objectives very sustainably since
1995. This manual, which has used the exten-
sive experience of SELCO, aims to help all the
parties concerned, the system provider, end
user and the nance provider to understand
and utilize nancial linkages to bring light and
power to energy deprived areas of the country.
SELCO Incubation Centre 7
3. SOLAR FINANCING:
STRUCTURE AND DESIGN
3.1 How do we determine if the customer
needs nancing?
First, the best suited solution should be
identied for energy needs of a customer. If
the initial cost of this solution is not aordable
upfront by the customer, then nancing can be
considered as a suitable alternative. The money
the family/household spends currently on fuel/
energy source can be diverted towards repaying
the loan.
For example, a rural household spending
Rs.150/- per month on kerosene for lighting
can avail of a loan to install a bright 2 light solar
system. The loan can be repaid fully within a
5 year period with monthly instalments of
Rs.150/-, an amount that it was spending for
kerosene. The system if properly serviced
has an average life of 7 to 8 years. An interim
replacement of the battery will add another 7
to 8 years of life. In addition, if the solar light
can support their livelihood activity for more
hours after dusk (extends the working hours of
their shop, weaving, handicraft making, etc), the
extra income will contribute amply towards the
repayment amount.
3.2 How do we determine if the customer
can aord the equipment even if nanced?
Aordability is determined based on the existing
income and expenditure of the household. The
expenditure on the existing source of fuel/light
is calculated and diverted towards paying for the
solar apparatus. For example, a household with
a monthly income of Rs. 5000 may be spending
Rs. 150 per month on kerosene for lighting.
The cost of the solar product is approximately
Rs. 7000 with no monthly expenditure. This
household can easily buy the product as well
as save Rs.150 per month that it was spending
on kerosene. Savings which can be made by
switching to solar as a mode of power supply
should also be kept in mind. This forms the basis
for calculating the aordability for the customer.
3.3 How should nancing be designed for
the customer?
Financing should be designed based on the cash
ow of the customer to signicantly improve
the aordability of the product. For example,
a farmer growing a crop such as sugarcane
receives income once every six months. A
loan demanding monthly repayment can be
extremely inconvenient for him. However, the
same farmer can pay a six monthly instalment
as it matches with his cash ow.
Institutional nance for the consumer has
multiple benets as well.
Financing Solar Home Lighting Systems (SHLS)
is a relatively new area for commercial banks,
Regional Rural Banks, and cooperatives. The
technical feasibility of SHLS has been established
beyond doubt. Photovoltaic (PV) lighting can
provide the user/customer with several benets
such as nancial, health, and convenience, if the
fairly large up-front capital cost can be nanced
with reasonable and aordable terms. Financing
PV systems is more or less the same as nancing
any other project/product. Each bank may have
its own specic guidelines on various aspects of
nancing SHLS.
3.4 Financing Institutions
It is a myth that the nancial assistance to poor
should always be in the form of subsidy or grant.
All the sustainable nancial linkages available in
the country can also be utilized productively by
the poor, if a little eort is put in to implement
small innovations to overcome hindrances. Let
us try to understand dierent nancial linkages
available.
1. Banks / Regional Rural Banks (RRB)
2. Micronance Institutions
3. Co-Operatives
4. Private nancing modes (Chit funds, Marup,
Hundi etc)
5. Company self-nancing (e.g. Pre paid model)
6. Intermediate entrepreneur model (e.g.
Hawker rental model)
7. Grant used as rolling fund or as margin
money support for loans
Out of the above mentioned options, Regional
Rural Banks (RRBs) are the best suited and most
reliable nancial linkage in remote regions.
Hence banks will be discussed in the following
chapters. However brief explanation of other
options will also be found in the manual.
SELCO Incubation Centre 9
have matured into institutions that are largely
responsible for the nancial inclusion objective
of the nation. RRBs are truly the last- mile bank
connectivity for end consumer nancing.
SELCOs objective of addressing energy needs
of the poor in the rural districts of India meant
that facilitation of nancing had to be created
through the RRBs. RRBs are jointly owned by
Government of India, the concerned State
Government and a sponsor bank (which is a
scheduled commercial bank).
4.1 History of Banks in India and their Role
Since the late 18th century, banks have aided
the growth of commerce and economic activity
in India. It is imperative for any business activity
to have its nancing needs fullled through
banking institutions. Banking institutions also
help the consumer by oering various options
of nancing their needs. However, in all such
transactions it is vital for the bank to see it as
a protable transaction that contributes to its
bottom-line.
The upfront high capital cost for solar
technology makes it essential that a nancing
mechanism exists for consumers. However,
when SELCO started to advocate it in 1995, it
was almost unheard of. Further, the customer
segment SELCO wanted to focus on had almost
no exposure to banking and neither had the
banks dealt with this segment. However, this
equation has changed for the better today,
as a result of SELCO helping to create a loan
portfolio for under-served communities to avail
solar home lighting systems.
The illustration on this page explains the various
types of banks in India. Due to the customer
segment that SELCO has chosen to focus on,
the majority of transactions rely on the regional
rural banks (RRBs). RRBs were established with
the objective to ensure sucient institutional
credit for agriculture and other rural sectors. They
Structure of the organised banking sector in India.
Number of banks are in brackets
Image Courtesy: Wikipedia Commons
* As on April 2013
RESERVE BANK OF INDIA
Central bank and supreme monetary authority
SCHEDULED BANKS
Commerical banks
Foreign
banks
(40)
Reginal
rural banks
(64)*
Urban
co-opeative
(52)
Old (22)
State
Cooperatives
(16)
New (8)
Public sector banks (27)
State bank of India
and associate banks (8)
Other nationalised banks
(19)
Privatesector banks (30)
Co-operative
4. BANKS
4.2 Banks and Solar nancing
It is vital to establish the crucial link between
economic activity and introduction of solar
lighting in a rural household. Only then will
a bank see it as a commercial success. It took
considerable eorts on the part of SELCO
to convince the erstwhile Syndicate Bank
sponsored Mallaprabha Grameen Bank
headquartered in Dharwad to grant the rst solar
loan in 1996. Ever since then SELCO has strived
to prove the credible link between livelihood
impact and availability of a reliable and healthy
source of lighting in a rural household.
We have another shining example of how
banks have made a signicant contribution
to the local village economy by introducing
solar lighting in Aryavart Gramin Bank based
in Lucknow. In 2008 the RRB, based in one of
the most backward states of India, won the
prestigious Ashden Award, also known as the
Green Oscars for nancing nearly 28,000 solar
systems by 2009. To quote Aryavart Gramin Bank
Solar home systems have enabled people to
work in the evenings and earn more, which is
particularly useful to women. The main cottage
industry in the area is ne embroidery (Chikan
work), for which bright light is a real boon. One
family of nine female tailors and embroiderers
has seen their earnings increase by about Rs 450
per month each as a result of the PV lighting.
The bank organizes credit camps across its
operation areas where they demystify solar
technology and make nancing available on
the spot for the systems. The bank found that
customers of other banks turned up for the
camps in the hope of getting a solar loan, and
this eventually led to Aryavart becoming their
banker for all their other needs.
4.3 Benets accruing to banks from lending
for Solar home lighting system
4.3.1. Categorized under Priority Sector
lending:
Solar home lighting systems and other o-grid
systems have been included under Priority
sector lending based on guidelines by the
Reserve Bank of India. The banks can extend
nancing as part of meeting their 40% priority
sector lending targets.
4.3.2. Dierential Rate of Interest (DRI)
scheme targets:
As per guidelines of the Reserve Bank of India,
a dierential rate of interest of 4% is applicable
on loans up to Rs. 15000, extended by banks to
weaker communities whose household income
does not exceed Rs. 18000 (in rural areas) and
Rs. 24000 (in urban and semi urban areas) per
annum. The loan is extended for any gainful
utilization.
Priority sector lending guidelines provide for
sub targets to ensure that every bank lends
at least 1% of its total advances towards the
DRI scheme . Lending for solar home lighting
systems to poorer households and weaker
communities can help an individual bank meet
its DRI targets.
4.3.3. Credit access under nancial inclusion:
The existing policy for annual bank expansion
mandates that all Regional Rural Banks and
Commercial banks must establish at least 25%
of their new branches in unbanked rural areas .
These branches are meant to improve banking
penetration and accelerate nancial inclusion by
catering to poor and middle class households in
rural areas.
SELCO Incubation Centre 11
In the initial phase, these branches are to open
no-frills accounts for customers, with minimum
balance requirements and low charges. In the
next phase, customers are to be provided with
credit access for gainful purposes. The solar
home lighting system is an ideal portfolio for
which credit can be extended to the rural
household. The overall impact of nancing
such a system would include improvements
in education, health, cooking and living
conditions as well as provide opportunities for
increased income generation at the household
level. Thus, provision of credit access for solar
systems not only benets the rural household,
it also facilitates gainful utilization of bank
linkage (going beyond the mere creation of
no-frills account) from the nancial institution
perspective.
4.3.4. Renance from NABARD:
Solar energy systems, particularly at the o-grid
level, are eligible for renancing from NABARD
up to 90-95% of the total system cost. Although
in the current scenario, a number of banks are
ush with funds, the NABARD renance facility
will allow banks to use their funds for other
lending purposes while extending nance
(availed from NABARD) for solar energy systems.
4.3.5. Claiming carbon credits:
Banks which engage actively in lending for solar
o-grid systems can work out a mechanism
to claim carbon credits for these systems . This
would not only bring in additional revenue for
the bank but also help them earn a reputation
at the National and International level for their
initiative in ghting climate change while
supporting energy access. In the larger scheme
of things, nancing for sustainable energy
technologies would facilitate the achievement
of Sustainable Development Goals set forth by
the historic Earth Summit (1992) for its member
nations.
4.3.6. Corporate Social Responsibility (CSR)
funds:
Each bank is required to spend 2% of the prots
earned towards Corporate Social Responsibility
(CSR) related projects. By partnering with
solar energy providers, a number of o-grid
solar energy interventions for rural and poor
communities can be facilitated including street
lighting, solar home lighting for poor, remote and
tribal settlements, energy needs of community
centres and schools, etc. Thus, banks can meet
their CSR requirements while also gaining the
goodwill and trust of rural communities.
4.3.7. Ensuring repayment through
promotion of livelihoods, rural betterment:
Several government schemes and bank loans
exist for the promotion of livelihood activities,
particularly among weaker communities. Use
of solar home lighting system in the household
could also increase productive working hours
and provide possibilities of additional income
generation. This will support households in
repaying loans availed through banks.
Banks are required to lend to Self Help Groups
(SHGs) and Joint Liability Groups (JLGs) created
by banks themselves or by other organizations.
A number of these SHGs are Womens groups
and take up household level income generation
activities to improve living standards and
facilitate womens empowerment. Financing
home lighting systems for such SHG and
JLG members could not only bring about an
appreciable change in the life of women, but
also facilitate improvements in productivity of
their work.
Finally, RRBs and Commercial banks in dierent
areas take up village adoption programmes for
all round development of villages including
nancial, social and educational activities.
Solar energy nancing could support in this
development process by meeting the much
needed energy requirements at the village level.
Thus, nancing for solar energy systems for
various developmental products and services
including lighting, productive use, mobile
charging, educational aids, etc. help the banks
in meeting their rural development agenda,
while also ensuring improvements in customer
incomes that would help them regularly repay
loans.
4.4 Who is eligible for Financing?
The eligibility criteria for nancing are:
4.4.1. Individuals such as farmers, traders,
professionals, businessmen, salaried
persons including employees of the bank,
artisans, craftsmen, daily wage earners,
etc.
4.4.2. Organisations such as rms, companies,
institutions, associations.
4.4.3. Individuals who have a source of income
adequate enough to repay the loan with
interest as stipulated by the bank
4.4.4. Individuals who are residents in the
service area or the command area of the
bank. (He/she need not be a permanent
resident/domicile of that area especially
in case of salaried persons.)
4.4. 5. An existing customer whose past dealings
have been satisfactory.
4.5 What are the pre-requisites, conditions
and requirements for granting the loan?
4.5.1. Loan Proposal
The loan application should be submitted
by the applicant in the form prescribed by
the bank. The applicant shall furnish all the
necessary information as required by the bank.
The enterprise team will help the customer in
furnishing the details. In addition, the following
requirements should be obtained depending
on the category of the applicant:
Record of Right (ROR) or village accountants
certicate or Adangal or Chitta or Pahani or
10-1 extract or Patta book furnishing of land
holding in case of farmers and agriculture.
Copy of the Patta/Khatha or possession
certicate issued by the Town Panchayat,
Municipality or City Corporation in case
of urban or metropolitan areas furnishing
details of house property.
Copy of the rent agreement or any other
proof of residence like the family ration card.
Latest land revenue/ Municipal Tax/ House
tax paid receipt.
Proof of tenancy in case the applicant is the
tenant occupant of the house.
Two recent passport size photographs of the
applicant.
Proforma invoice/quotation from the
manufacturer /supplier of the SHLS for the
cost of the system including the accessories
and the installation.
Copy of the test report issued by the Solar
Energy Centre or Authorised Test Centre.
The applicant shall also submit original
title deeds of the property, encumbrance
certicate, legal opinion, property valuation
certicate, and other supporting documents
whenever the loan is required to be secured
by mortgage.
SELCO Incubation Centre 13
In case of corporate clients and frms,
audited nancial statements for the last three
years, partnership deed, memorandum of
understanding, articles of associations, board
resolution to borrow, etc.
Income Tax assessment order or the copy
of the return lled with the ITO (wherever
applicable).
4.5.2. Appraisal of the Proposal
On receipt of the loan proposal for nancing
SHLS along with the requirements, the Branch
Manager or any other ocer designated by
him should undertake a pre-sanctioned spot
inspection of the location/site where the
SHLS is to be installed. The proposal should be
thoroughly discussed with the applicant.
The proposal should be appraised taking into
consideration the technical, nancial, economic,
commercial, managerial and legal aspects to
determine the technical feasibility, nancial
viability and overall bankability of the proposal.
The repaying capacity of the borrower should
be carefully assessed.
4.5.3. Technical Aspects
The nancing bank should get from the
manufacturer or his authorised dealer a copy
of the test report issued by the Solar Energy
Centre (SEC)/Other Authorised Text Centre
(OATC) certifying that the SHLS being supplied
to the applicant conforms to the specications
prescribed by the Ministry of New and
Renewable Energy (MNRE), Government of
India. In addition, the nancing bank should
ensure that there is a minimum warranty of
ve years for the complete system including
battery (every component except the compact
uorescent light or bulb), and a minimum
warranty of 10 years for the PV module. All
Warranties should commence from the date of
installation.
The bank should also ensure that the
manufacturer/ dealer of the systems oers
Annual Maintenance Contract (AMC) covering
supply of spares (excluding batteries) and
service for a minimum of ve years mandatory
warranty period to ensure satisfactory operation
of the system on a sustainable basis. The terms of
the AMC should be agreed upon by the system
supplier and the end user on a reasonable basis.
The exact requirement and the design of the
SHLS should be determined by the end user in
discussion with the manufacturer/authorised
dealer.
4.5.4. Legal Aspects
Legal problems if any, especially in installing the
system and, in case of nance for larger systems
should be looked into. Legal compliance with
respect to factors such as collateral security
must be ensured.
4.5.5. Repayment Capacity
First, the product itself needs to be designed
such that the system cost when converted into
a loan or instalment, makes it aordable and
provides maximum benet (or payback) within
the repayment period. This has to be true even
in the absence of subsidy. Commercial banks
stipulate that the loan for SHLS be repaid within
a stipulated period. The bank has to adopt a
Holistic Approach taking into consideration
the entire family income and expenditure of
the borrower. The bank has to be satised
about the repaying capacity of the borrower
who may be relying on other viable and known
sources of income as is being done in the case
of Personnel Banking or Consumer Durable
Loans.
4.5.6. Sanctioning Authority
After the credit proposal is thoroughly
appraised and its bankability is established,
the Bank Manager sanctions the proposal
with the terms and conditions if any. In other
cases, the proposal, along with the Branch
Managers recommendation is sent to higher
authorities for credit decision. Once the loan
is sanctioned, the manufacturer/ supplier who
gave the quotation/ proforma invoice should
be informed of the same, and asked to supply
the SHLS to the applicant. He should also be
told that the bank will remit the cost of the
SHLS to him upon its satisfactory installation
and conrmation of the same by the customer.
4.5.7. Documentation & Disbursement
Upon fullment of the terms and conditions,
the loan is arranged by obtaining the loan
documents executed by the borrower and the
surety (wherever applicable). Depending on the
quantum of loan and its category, hypothecation
of the SHLS unit is obtained. Wherever required,
collateral like mortgage of land, building etc.
or pledge of NSC, KVP or assignment of LIP
etc. can be obtained. The loan amount along
with the margin contribution (generally held
in account of the borrower) shall be released to
the manufacturer or supplier upon a satisfactory
report of installation of the SHLS conrmed by
the borrower.
Note: The original invoice and stamped receipt
must be obtained from the manufacturer/
dealer.
4.5.8. Rate of Interest
The RBI directives govern the interest rate on
SELCO Incubation Centre 15
loans up to Rs. 2 lakhs for priority sectors. The
interest rate on SHLS loans are eligible to be
classied under Priority Sector and should not
exceed the Prime Term Lending Rate (PTLR)
of the bank. In case the loan exceeds Rs. 2
lakhs under Priority Sector or where the SHLS
loan is outside the purview of Priority Sector,
the interest rate depends on the policy of the
lending bank. Penal interest at 2% above the
normal rate may be levied for overdue loans
where the loan amount exceeds Rs. 25,000 in
case of Priority Sector and Rs.5000 in case of
Non Priority Sector.
4.5.9. Service Charges
One time processing and other charges are
normally at 0.1% to 0.25% of the loan amount
at the time of arranging the loan. The rate of
service charges varies from bank to bank, and
should be applied as per the banks guidelines.
4.5.10. Security
Hypothecation of the asset created out of
the loan is the SHLS
Creation of charge on the property or
mortgage of immovable property as
collateral security wherever required
(normally when the loan amount exceeds Rs.
25,000)
Collateral such as NSC, KVP, LIP of adequate
value are also acceptable.
4.5.11. Surety / Guarantor
A credit worthy party (preferably third party) may
join as the loan transaction Surety / Guarantor.
4.5.12. Repayment
The loan is to be repaid in monthly/ quarterly/
half yearly / yearly instalments over a period of
ve years depending on the source of income
of the borrower. Interest, however, shall be paid
quarterly or as and when debited to the loan
account.
Note: Initial moratorium of three months from the
date of loan may be given for repayment whenever
found necessary.
4.5.13. Classication
The loan facility for SHLS is generally extended in
the form of a Term Loan. As per RBI regulations,
loans extended for SHLS or any other solar
appliance shall be classied depending on the
occupation or vocation of the borrower. For
instance an SHLS loan extended to a farmer
should be classied as an agricultural advance.
The SHLS loan extended to retail trade shall be
classied as a retail trade loan under priority
sector. A loan granted to a salaried person for
SHLS shall be classied as a non priority sector
advance.
Note: Classication of advance has a direct bearing
on the interest rate charged.
4.6. Borrower Assessment - Checkpoints
This section of the manual is designed to
instruct the Bank ocials on the methods
to be adopted for nancing the installation
of SHLS, typically including a PV module and
appropriate balance-of-system components
necessary to provide reliable, safe, and
aordable electricity from sunlight for domestic
and other similar usage. The SHLS includes a
module, battery, charge controller and a set
of compact uorescent lights. Larger systems
may also include an inverter (to convert the
DC electricity generated by the PV modules to
AC) and connections for televisions, radios, and
other domestic electrical appliances.
To frame a proposal quickly, bankers and
promoters must meet and discuss. The
assessment standards will vary from person
to person, depending upon the size of the
loan, experience of the banker, dealings of the
borrower and so on. The following brief should
help the banker to prepare the loan proposal
eciently:
Table 1: Check points for assessing the
customer
The background of the promoter/beneciary/
entrepreneur must also include the following
details
- Who is the borrower?
- What business is he doing?
- Is he a customer of the bank?
- If he is not, which bank has he been dealing
with so far?
- Why did he not approach that bank for credit
requirements?
- If he is a customer of the bank, then has he
borrowed from it in the past? What is his
track record?
- In case of a new borrower / promoter, the
banker may wish to collect further details.
The banker may prefer to meet the promoter/
borrower directly and not through any
agency or third person. Such a meeting
provides an opportunity to collect rst hand
information for discussion. It also helps the
banker to check the various statements and
gures furnished in the proposal/ application.
It must be seen whether the cost estimates
are reasonable as per the standard rates, and
whether any capital and/or interest subsidy is
available.
The time required to install and energize
the equipment is to be specied clearly and
correctly.
All documents required by the banker are to be
submitted along with the application.
The availability of after-sales services must
be ensured. There should be arrangement to
provide spares in case of defective materials
supplied or for replacement, whenever required.
Initial payment holiday should be specic and
xing of the instalments (whether monthly,
quarterly, half yearly, etc.) must be done
considering the source of income.
The following aspects must also be looked into
- What is the amount of loan required?
- What will the loan mean to the borrower
from the prot point of view?
- When and how will the loan be repaid?
- Where will the funds come from for repaying
the loan?
- Will the SHLS help the borrower to reduce
expenditure and increase savings to repay
the loan?
- Does the borrower have a basic idea about
the possible amount of net savings/ prot
after the installation?
- How will the borrower bring in the required
margin money?
- Does the borrower have the necessary
technical skill to handle the PV system and its
maintenance or does he need any training?
- Has he properly assessed the special features
such as number of lights required etc.?
4.7 What are the Dos and Donts while lling
the form for a loan?
SELCO Incubation Centre 17
In most cases it is the bank manager or other
executives at the bank who assist in lling
the loan form and in some cases it is the sales
executive or the branch manager. All the
required documents must be available at the
time of lling the form. The required documents
are mentioned below. It is mandatory that the
No Objection Certicates (NOC) must be issued.
Important: Care should be taken that the borrower
does not have a default history.
Table 2: Documents required by Customers
KYC documents like ID and Address proof for
opening A/c (new customers)
Photographs of both borrowers and Guaran-
tors
No Due Certicates from other nancial
agencies
Record of Rights, Tenancy and Crop Inspec-
tion (RTC) for Agriculturists (income proof for
the agriculturist)
Salary certicate/Pay slip (income proof for
the salaried)
ITR Returns/ P&L and Balance sheet (income
proof for business and others)
Margin deposit (20% in case of JNNSM
scheme)
Documentation charges/ Bank charges (in
most cases will be debited to their A/c)
Adavit/Declaration of Family Tree (Vamsha
Vruksha)
Tax paid receipt of the property
Khata/1-11 or 12 (survey record from village
panchayat)
Table 3: Bank documents to be executed by
the banker/customer/guarantor
Application cum appraisal and sanction/rec-
ommendation to the higher authority
Inspection Report by the banker
Terms and conditions letter
Demand Promissory Note (DPN) and De-
mand Promissory(DP) Note delivery letter
Deed of Hypothecation cum Guarantee
Agreement
Transfer slip to transfer the amount from the
loan A/C to the SB A/C
Table 4: Documents from the Supplier/
Enterprise
Quotation from the supplier
Stamped receipts
Delivery note/Tax invoice
Insurance policy (wherever applicable)
Performance guarantee letter from the sup-
plier/warranty cards
Declaration by the agency supplying o-grid
solar application system (subsidy claim)
Table 5: Documentation required for SHGs
Application
SHG Resolution
Financial Statement of the group
SHG Grading form
Terms and Conditions letter
DPN and DP Note delivery letter
Articles of agreement (Agreement Deed)
Inter se Agreement (General power of
attorney)
Table 6: Documentation required for Joint
Liability Groups (JLGs)
Application
Application for loan by individual member
under JLG scheme
Sanction cum terms and conditions letter
Letter of Undertaking (to be obtained from
each member of JLG as borrower with other
members as guarantors)
Inter se Agreement (executed by the
members of JLG)
Mutual Agreement (to be stamped as an
agreement)
DPN and DP Note delivery letter from each
member
4.8 When does the bank reject nancing?
The borrower is a defaulter
The borrower is not bankable. It means that
he has no regular source of income or he is
not in a position to pay back the loan
The borrower does not have proper security.
In case he owns assets, he may not have
proper records of them
The bank also uses a creditworthiness form
to assess in detail if the customer is worthy of
loan
The bank at times may not have a valid reason
while rejecting the loan; the sales executive
must have the patience to nd out why the
loan is rejected and help the borrower in
obtaining the loan or nd another source of
funding
4.9 How can the service provider help the
bank in the process of recovery?
The key to ensure smooth nance tenure for
both the beneciary as well as the banker is to
have a good operational solar home lighting
system. This can only happen by ensuring
regular service or a mechanism by which the
customer can reach the service provider for
any help in case of a breakdown. At any point
when there is no service the system is rendered
useless, and automatically the customer sees no
point in continuing to repay the loan.
The other factor is to educate the terms of
nancing in a clear medium to the customer.
The customer should have no ambiguity about
total cost of the system, down payment, loan
term, interest rate, instalment frequency and
amount and the mechanism to repay as well as
familiarity with the bank sta. All this will result
in a good standing relationship for all the three
parties beneciary, bank as well as the service
provider.
In the event of any unforeseen circumstance
of the beneciary defaulting on repayment,
the service provider must assist the bank in the
recovery process. Although as a commercial
transaction the service provider is not liable
to get involved in the recovery mechanism it
helps build a long standing relationship with
the nancing institution in the process. The
service provider may make a courtesy visit to
the customers place to enquire the reason for
non-payment and the need for any assistance
in this matter.
Banks generally have a monitoring team whose
assistance is sought for any loan recovery. The
service provider should co-operate with this
team, if requested for any assistance.
4.10 Does Government of India provide
support?
Government of India announces various support
schemes to popularize the usage of renewable
energy. Most of the times, banks are involved
in the process of disbursing monetary support
to the beneciaries. From time to time, the
SELCO Incubation Centre 19
After the customer is ready to buy a
SHLS & proper SHLS is identied.
Collect the full payment
from the customer
No
No
B
a
n
k

M
a
n
a
g
e
r
Find other
nancial linkages.
Does the customer need nancing?
Is the customer credit worthy?
Verify the required docs and
get the NOC
Fill the subsidy from and the
claim from
Release the money to the
entrepreneur
Customer pays the
instalments as designed
Process ow for nancing a solar home lighting system
government issues notice to the nationalised
banks and provides guidelines on the process
of implementing such support programmes.
Jawaharlal Nehru National Solar Mission is a
government mission started by the Ministry of
New and Renewable Energy to encourage the
usage of renewable energy in India with specic
targets over a long period. The details of JNNSM
are discussed in detail as a separate chapter
in this manual. Service providers should be
completely aware of such government schemes
and should actively associate with banks to help
them reach these schemes to the end user most
productively.
Despite best eorts we have seen a number
of instances where end user nancing has not
been possible through the banking channels
mentioned above. This can happen for a variety
of reasons including:
Perceived risk profle of the customer
Lack of or insufcient essential identity proof
documents
No banks operating in the customers vicinity
In such cases where nancing through banking
channels is not possible, some other nancing
options can be considered. These are listed
below:
Micro Finance Institutions (MFI): These
provide nancial services to micro-
entrepreneurs, small businesses or to self-
help groups. They usually operate in areas
which lack access to banking due to high
transaction costs associated in servicing these
locations, or the risks associated with them.
The concept of micronance institutions
was pioneered by Dr. Muhammad Yunus
in Bangaldesh through the Grameen Bank.
MFIs rely on the strength of group dynamics
to ensure the repayment capacity as well as
transaction costs.
Private forms of fnance Chit funds,
Hundis, Maroop: Each region has its own
form of savings scheme and are known by
various names across India chit, chit fund,
chitty, kuri or maroop (popular in Manipur).
They all represent an agreement with a
specied number of persons, who will each
subscribe a xed amount each month over
a denite period. In return, each subscriber
is entitled to a prize amount which is
determined by an auction, lottery or a tender.
Company self-fnancing through pre-
paid payment options: A few companies
like Simpa have introduced a pay-as-you-go
pricing to household energy systems. Users
pre-pay based on actual usage and each
payment adds up towards the total purchase
price of the solar home system. Consumers
can send payments using a mobile phone.
Once fully paid, the solar home system
unlocks and delivers free electricity for the
expected 10-year life of the product.
5.1 For nancial inclusion of extremely poor
communities, how can grant amount be
utilized?
SELCO business model has always been
about establishing strong innovative linkages
between end users, energy services, technology
and nancing. SELCO views a product as a
combination of technology and nance and
hence uses a 2 pronged approach of door-step
service and door-step nancing. It has been
5. OTHER FINANCING
MECHANISMS
SELCO Incubation Centre 21
able to assess the end user needs and create a
solution that best ts his/her need. This need
can be technical, nancial or a simple process
innovation that could empower the lives of
under-served or un-served households and
small scale businesses. The key features of the
model are:
i) Creating products based on end user needs
- thus going beyond the role of just being a
technology supplier to actual customizing
the products to suit individual needs, along
with dedicated installation and after sales
services from well established energy service
centre network.
ii) Flexible nancial packages to suit the end
users aordability and cash ow.
These approaches are further innovated under
Mission Projects for eectively reaching out to
those poorer sections that are generally never
a part of the mainstream nancing. In order
to create the rst time bridges to the nancial
institutions, Mission Projects uses several
innovative mechanisms to facilitate linkages.
Risk Guarantee SELCO shares the risk of
repayment with the nancial institution by
providing Buy Back Letters upon default or
by opening Security Deposits to serve as
collateral against the borrowed loan amount.
Margin Money Financing - In order to enable
the loans, the end users need to contribute
certain percentage of the loan amount as
down payment. In case of Mission projects,
SELCO bears the costs towards this down
payment by contributing the Margin money
and ensures that loans are enabled.
Interest Subsidy In another mechanism,
SELCO contributes towards waiver of certain
percentage of interest rate.
Partial Contribution Many a times, in
partnership with other organizations or
under any particular welfare schemes by
Government departments, SELCO directly
contributes a certain percent of the total cost
of the product.
Smart Subsidies on Product Pricing The
product prices are subsidized by providing
appropriate discounts and waivers for the
benet of the end user.
Products / Services Innovation In certain
special cases, certain technical/ services
innovations are brought into the regular
systems in order to bring down the cost of
the product and make it aordable to the
end user.
High Risk Projects These are undertaken
with specic poor segments of the society
where the outcome of the project is
highly unpredictable, e.g. Basket weavers,
Shepherds, Silk reeling etc. A few other R&D
projects are also undertaken whose nature
of outcome is unknown, e.g. micro-energy
entrepreneurs.
As of now, the Mission Project initiative is
funded through the soft monies raised from
a few grants, awards, etc. The future plan is to
evolve into some sort of a sustainable Revolving
Fund structure which can be used for all above
mentioned purposes.
Some Highlights
Nearly 5000 un-electrifed homes have been
powered with solar lighting systems under
the project
SELCO is continuously trying to engage
with the Siddi tribes (African tribes) based in
North Karnataka and has been successful in
electrifying 33 Siddi Households in Yellapur,
Uttar Kannada that was nanced by KVGB.
Urban poor- energy-fnancial linkage
established successfully and replicated
in three slums of Pragatinagar, Manipal;
Beedinagudde, Udupi and Peenya, Bangalore.
SELCO has worked with the Maldhari
communities in the Rann of Kutchh who live
in completely cut o remote areas without
any access to clean energy and provided 20
lighting systems till date.
SELCO has taken on the challenge of
nancial-energy inclusion for 200 o-grid
non-bankable poor homes in Gulbarga,
Karnataka.
SELCO Incubation Centre 23
6. JAWAHARLAL NEHRU NATIONAL
SOLAR MISSION (JNNSM)
The National Action Plan on Climate Change
points out: India is a tropical country, where
sunshine is available for longer hours per day
and in great intensity. Solar energy, therefore,
has great potential as future energy source.
It also has the advantage of permitting the
decentralized distribution of energy, thereby
empowering people at the grassroots level.
Based on this vision, a National Solar Mission is
being launched under the brand name Solar
India.
The National Solar Mission is a major initiative
of the Ministry of New and Renewable Energy,
Government of India (MNRE
1
), to promote
ecologically sustainable growth while
addressing Indias energy security challenge.
It will also constitute a major contribution by
India to the global eort to meet the challenges
of climate change.
What is the objective of JNNSM?
The objective of the National Solar Mission
is to establish India as a global leader in solar
energy, by creating the policy conditions for its
widespread usage across the country as quickly
as possible.
What are the mission targets of JNNSM?
The mission targets of JNNSM are:
To create an enabling policy framework for
the deployment of 20,000 MW of solar power
by 2022.
To ramp up the capacity of grid-connected
solar power generation to 1000 MW within
three years by 2013; an additional 3000
MW by 2017 through the mandatory use
of the renewable purchase obligation by
utilities backed with a preferential tari. The
ambitious target for 2022 of 20,000 MW or
more, will be dependent on the learning
of the rst two phases, which if successful,
could lead to conditions of grid-competitive
solar power.
To promote programmes for of grid
applications, reaching 1000 MW by 2017 and
2000 MW by 2022.
To achieve 15 million sq. meters solar thermal
collector area by 2017 and 20 million by 2022.
To deploy 20 million solar lighting systems in
rural areas by 2022.
Since the nationalization of 14 major commercial
banks in 1969 and 6 more banks in 1980, the
Governments policy has been clearly directed
towards making these banks play an important
role in promoting rural development. Be it
1
http://www.mnre.gov.in/solar-mission/jnnsm/
introduction-2/
nancing for investments, to increase agricultural
production or promoting small businesses or
industries, transport and communication, the
banks have pumped enormous amount of
money as credit assistance.
PLEASE NOTE: The details of the JNNSM
scheme, particularly the interest rates and
subsidy conditions are subject to revision.
The details mentioned in the book were taken
when the book was being compiled (Nov
2012). Please refer to the MNRE website for
current updates. http://www.mnre.gov.in/
solar-mission
6.1 Capital Subsidy Scheme
2
Capital Subsidy Scheme will be implemented
by NABARD through Regional Rural Banks and
other commercial Banks for Solar Lighting
Systems and Small Capacity PV Systems.
Under this scheme, NABARD will extend the
subsidy of 40% of the benchmark cost which is
Rs.270/- per watt peak subject to a maximum
of Rs. 108/- per watt peak, to the Regional Rural
Banks (RRBs) and other commercial Banks, for
purchase of solar lighting systems and other
small capacity PV systems by individuals. The
RRBs and other Commercial Banks could extend
the loan for the balance cost of the systems at
normal interest rates for the period decided by
the RRBs or the Banks.
While implementing this scheme, NABARD will
follow the minimal technical requirements and
Quality Standards in respect of the o-grid SPV
power plants/systems which are mentioned
in Annexure-3 enclosed with the Ministrys
Administrative Approval No.5/23/2009-10/P&C
dated 8th July 2010.
6.1.1. What are the objectives of the scheme?
The main objectives of the scheme are to:
- Promote o-grid applications of solar energy
(both PV and Solar Thermal)
- Create a paradigm shift needed for
commoditization of o-grid solar applications
- Encourage replacement of non-renewable
energy sources like fossil fuels, kerosene and
diesel with solar energy to meet the energy
requirements.
6.1.2.What are Margin Money, Loan Period
and Rate of Interest on Loan?
The borrowers are required to bring in 20% of
the cost of the project as the margin money for
accessing credit facilities from banks to acquire
the assets. The loans to cover the balance (within
the ceilings specied against each asset) after
reducing the eligible capital subsidy, would
be extended with a repayment period not
exceeding 5 years and would carry an interest
rate which is the regular rate of interest charged
by the bank. There is a minimum period of
3 years where the subsidy is locked. This is a
backend subsidy which helps to keep a track of
the repayment of the loan.
6.1.3.Security & Monitoring
The loans extended under the scheme would
be secured as per the existing RBI guidelines
in this regard. The nancing banks will have to
maintain separate records for loans/subsidy
extended under the scheme and the details
2
http://mnre.gov.in/le-manager/UserFiles/bank_
subsidy_scheme_jnnsm_st_29022012.pdf
SELCO Incubation Centre 25
3
http://mnre.gov.in/le manager / UserFiles /Revised_Capital_Subsidy_ and_Benchmark_ costofthe _SPV _system.pdf
will have to be submitted to MNRE/NABARD/
IREDA as and when required. MNRE/NABARD/
IREDA will also have the right to inspect the
books of accounts pertaining to such accounts
whenever required.
6.1.4. MNRE pre approved Models
With
3
eect from 01.04.2011 the benchmark
cost for photovoltaic was revised to Rs. 270 per
Wp (with battery) and Rs. 190 per Wp (without
Note: The banking norms for nancing SHLS are by and large common, but may vary from bank to bank in terms of Rate of
interest (ROI), Margin & security, Documentation, etc.
battery bank) respectively (as indicated in para
5.3 of the Administrative approval- 5/23/2009-
10/P&C dated 08.07.2010).
For general areas the Central Finance Assistance
(CFA) would be 30% limited to Rs. 81 per Wp
(with battery back-up) and Rs. 57 for systems
(without storage battery).
For Special category states/North-East States
the CFA would be 90% limited to Rs. 243 per
Wp (with battery back-up) and Rs. 171(without
battery backup).
Table 1 Technical and Financial Parameters of pre-approved PV models to be nanced
Model
Photo Vol-
taic Mod-
ule/ Panel
(Wp)
Battery Capacity
(AH)
Maximum
Recommended Load and
Duty Cycle
Benchmark
Cost (in Ru-
pees)
Maximum Capital
Subsidy eligible (Rs)
(@ Rs.108 per watt of
module capacity)
I 10 12V, 7AH (SMF)
5-7 watt load for 3 to 4
hours (20watt hrs/day)
2700 1080
II 18-20
12V, 20 AH
(Tubular L.M/
Gel VRLA)
10 watt load for 4 hours
(40 watt hrs/day)
4860 5400 2160
III 37-40
12V, 40AH
(Tubular L.M/
Gel VRLA)
20 watt load for 4 hours
(80watt hrs/day)
9990-10800 4320
IV 50
12V, 60AH
(Tubular L.M/
Gel VRLA)
30 watt load for 4 days
(120 watt hours/day)
13500 5400
V 70-80
12V, 80AH
(Tubular L.M/
Gel VRLA)
45 watt load for 4 hours
(180 watt hours/day)
18900-21600 8640
VI 100
12V, 120 AH
(Tubular L.M/
Gel VRLA)
60 watt load for 4 hours
(240 watt hours/day)
27000 10800
VII 125
12V, 150AH
(Tubular L.M/
Gel VRLA)
75 watt load for 4 hours
(300watt hours/day)
33750 13500
VIII 150-160
24V, 75/80AH
(Tubular L.M/
Gel VRLA)
90 watt load for 4 hours
(360 watt hours/day)
40500-43200 17280
IX 200-210
24V, 100/120AH
(Tubular L.M/
Gel VRLA)
120 watt load for 4 hours
(480 watt hours/day)
54000-56700 22680
6.1.5. What is the process of getting subsidy
from the bank?
Once the customer is identied and the
need for nancing is accomplished, the sales
executive gets a formal approval from the bank
manager to nance. A credit approval note
4

is authorised, on the basis of which the local
branch will install the system and ensure the
margin money is duly paid.
A subsidy form is lled by the bank. The bank
manager has to certify the Claim Form
5
and the
Capital Subsidy form
6
which are sent to the
Regional Oce (RO) or the Zonal Oce (ZO)
of the particular RRB. Once it is approved, the
amount is released directly to the organisation
4
Annexure 1
5
Annexure 2
6
Annexure 3
SELCO Incubation Centre 27
7. ANNEXURE
Model / Type
of System Unit Cost Quantity Total Cost
Direct/
Loan
Margin Amount
(To be collected
by....)
Balance
Amount
(To be col-
lected by....)
CAN / BRANCH / S No. .................................................................................... Date ....................................................................
Name of the Customer & Address ...........................................................................................................................................
.........................................................................................................................................................
.........................................................................................................................................................
.........................................................................................................................................................
Contact Telephone Number ........................................................................................................................................................
7.1 Credit Approval Note
Name of Bank, Branch Name .............................................................................................................................................................
Type of Bank Account & Account Number ..............................................................................................................................
Whether loan has been availed from the bank ( Yes/No) ................................................................................................
(If YES, Loan Ref No. .................................................................................................................................)
Assets ( Own House / Land, etc.) .....................................................................................................
Approved by
SELCO Branch Incharg
Subject to terms & Conditions of
our Bank Operations Manager
CREDIT APPROVAL NOTE
Subject to terms &
Conditions of our Bank
Loans under JNNSM Scheme of GOI
DRAWAL APPLICATION FOR SANCTION/ RELEASE OF REFINANCE UNDER JNNSM
SCHEME OF GOI UNDER AUTOMATIC REFINANCE FACILITY (ARF)
Ref. No. Date:
From (Name and Address of the Financing Bank)
To
The Chief General Manager/ OIC
NABARD Regional Oce,
_______________________
Dear Sir,
Application for Sanction/ Release of Renance under the Scheme for Solar O-grid (Photo-
voltaic & thermal) and decentralized applications under the Jawaharlal Nehru National Solar
Mission of the Government of India
We hereby apply for sanction and release of renance aggregating to `(Rupees
only) in respect of nancial assistance sanctioned and disbursed by us to our
constituents, the particulars in respect of which are furnished in the Annexure. We agree to repay the
renance availed of by our Bank as per the repayment schedule appended to this drawal application.
We also agree that the repayment schedule(s), if revised and communicated by NABARD, in respect of
renance claimed in this application will be scrupulously followed by us.
2. We certify that:
i. The individual loan proposal conforms to the policy, procedures and
guidelines laid down by NABARD under the captioned scheme from time to
time.
ii. The proposals have been appraised by us/ our branches and are found to
conform to the technical and nancial parameters laid down under the
captioned scheme guidelines of NABARD. iii. We have not applied earlier for
capital subsidy/ renance covered by this drawal application from NABARD
or any other institutioniv. The renance amount claimed is exclusive of the
recoveries/ capital subsidy/margin money received or receivable.
7.2 Claim Form
SELCO Incubation Centre 29
v. We have obtained consent letters from our constituents to the eect that
they have no objection to our furnishing to NABARD all such information as
may be required from time to time.
vi. MNRE/NABARD and IREDA will have the right to seek any information as
they may require from time to time and also for inspection of the unit.
vii. NABARD shall have the right to inspect books and loan accounts covered
under this application and /or call for copies of the related memoranda/
sanction notes/ any other relevant information in this behalf.
viii. Loans granted under DRI scheme have been excluded.
ix. All the units nanced under the scheme in respect of which renance is
claimed are eligible under Jawaharlal Nehru National Solar Mission scheme
of Government of India for subsidy/ renance.
x. The loans sanctioned to the borrowing units does not exceed the maximum
loan limits prescribed under the captioned scheme
3. We further certify that the amount of renance already availed by us and outstanding as on date
together with the proposed availment would be within the borrowing limit of our Bank.
4. We also certify that the rate of interest charged on the loan amount conform to the rates stipulated
by NABARD under the captioned scheme.
5. We agree that if on verication of our records and of our constituents,NABARD comes to the
conclusion that the accounts against which the disbursement of capital subsidy/ loan does not
conform the guidelines laid down by it from time to time, NABARD will have the right to recall the
entire capital subsidy/ renance disbursed in respect of such accounts on such conditions as stipulated
in the General Renance agreements.
For and on behalf of the nancing Bank
Signature of the authorized ocer with designation and rubber stamp.
Enclosure
Date :
Place :
From Borrower to Bank
(Repayment received during)
From bank to NABARD
Date Amount (`) (Repayable as on) Amount (`)
01 July to
31 December ..
31 January ..
01 January .
To 30 June
31 July
01 July to
31 December ..
31 January ..
01 January .
To 30 June
31 July
01 July to
31 December ..
31 January ..
01 January .
To 30 June
31 July
01 July to
31 December ..
31 January ..
01 January .
To 30 June
31 July
01 July to
31 December ..
31 January ..
01 January .
To 30 June
31 July
SELCO Incubation Centre 31
Sl.
No.
1
Pre-approved Model
Nos.
2
1
3
2
4
3
5
4
6
5
7
....
8
....
9
11
10
Solar
Water
Heating
System
11
Total
12
Individuals
Groups
Category - SC
- ST
- OBC
Minority Community
No. - Female
Total cost of the sys-
tem for units claimed
Capital Subsidy
Amount eligible for
units claimed (`)
Loan Amount exclud-
ing capital subsidy for
units claimed (`)
Margin Money by the
borrower for the units
claimed (`)
Certied that all the terms and conditions stipulated under the captioned scheme are satised in
case of all loans for which capital subsidy is claimed with this application and that the capital
subsidy claimed are within the monetary limits prescribed under the scheme.
We have not applied earlier for capital subsidy covered by this drawal application from
NABARD or any other institution
DRAWAL APPLICATION FOR CAPITAL SUBSIDY UNDER THE CAPITAL SUBSIDY-CUM-
REFINANCE SCHEME FOR INSTALLATION OF SOLAR OFF-GRID (PHOTO-VOLTAIC AND
THERMAL) & DECENTRALISED APPLICATIONS UNDER THE JAWAHARLAL NEHRU
NATIONAL SOLAR MISSION
Name of the Bank:
Period of the Claim (Month/Quarter) :
Details of the claim.
Name of the Branch: ........................................ District:........................................ State:........................................
7.3 Capital Subsidy Form
Capital subsidy Account:
Capital Subsidy Amount Received from NABARD
1. Drawal Application No. dated : `
2. Drawal Application No. dated : `
3. .
____________________________________________________________________________
Total Capital Subsidy Received : `
Capital Subsidy Disbursed:
1. Against Claims made under Drawal Applcation
No. : `
2. Against claims made under Drawal Application
No. : `
3. : `
____________________________________________________________________________
Total Capital Subsidy Released : `
Balance Capital subsidy with the Bank (as on ) : `
Total Capital subsidy claimed with this application : `
(Signature of the authorized ocer of the Bank)
Date and Seal of the Bank
SELCO Incubation Centre 33
7.4.1 Is nancing a SHLS a bankable
proposition?
If only the direct benets accruing as a result
of savings in electricity charges and /or other
conventional sources of lighting like kerosene,
candle, etc., are taken into consideration, the
SHLS needs about 10 15 years to be viable,
which is still well within the economic life of the
major component in the system i.e. the panel.
If the generation of additional income by way
of extended hours of work etc., consequent to
providing SHLS is considered, it becomes viable
and bankable even more quickly, within 5- 7
years.
7.4.2 Does nancing of SHLS fall into the
category of priority sector banking?
As per the existing guidelines of the Reserve
Bank of India, nance extended by banks to
devices of renewable energy shall be classied
based on the major activity of the borrower.
Hence, a loan granted for SHLS to a farmer, retail
trader, professional & self employed person has
to be classied under Priority sector. A loan for
SHLS granted to a salaried person will have to
be classied as a Non priority sector advance.
8.3 Can any model of SHLS be nanced?
Bank may choose to nance any SHLS model
depending on the general policy followed by
the bank management. It is advisable that the
bank observes appropriate due diligence on the
service provider of the system so that y-by
night operators products do not get nanced.
Poor quality models destroy the customers faith
in SHLS. Certication on the quality of systems
from reputed national institutions such as
central Power Research Institute (CPRI) should
make banks more comfortable with providing
nancial assistance.
7.4.4 Does the Solar Home Lighting System
have BIS certication?
Currently, there is no BIS certication for SHLS.
Certication by Solar Energy Centre (SES)
Gwalpalhari, Gurgaon, Electronics Regional Test
Laboratory (ERTL) Kolkata, CPRI Trivandrum,
Electronics Testing & Development Center
Bangalore is available. Banks may insist on
certication from any one of the above certifying
agencies.
7.4.5 Is there a restriction on the size of SHLS
while nancing?
No, at present the demand is generally for
1/2/3/4 light systems. Banks can very well
extend nance for SHLS units comprising of
any number of lights, and /or lights with other
utilities like fans, powering transistor, radio,
refrigerator etc. Manufacturers/dealers/service
providers should provide customized units to
suit the requirement of the end user.
7.4.6 Can the nancing of SHLS be made
to the tenants who reside in the house or
should it be made only to the house owner?
Generally it is a NO. But in some cases, banks
can provide nance to the tenant occupants, for
purchase and installation of SHLS.
7.4 Frequently Asked Questions
7.4.7 Are there any restrictions on the
category of people who can borrow loans
for SHLS?
There is no restriction on nance for any
individual. However, in the case of proprietorship
rms, or SHGs or institutions with board
members like religious places, trust or a co-
operative society, nance cannot be provided
as the position holder cannot be charged with
the liability of the loan.
7.4.8 Can a group of people qualify for a loan
for the purchase of SHLS?
Yes, if the panel can be installed in a convenient
central location and electricity generated is
distributed on mutually agreed terms between
the end users (group members), then formal
or informal groups can be provided nance.
It is advisable to insist on a proper interest
agreement among group members specifying
borrowing, repayment utilization, maintenance
of the unit etc.
7.4.9 Is insurance mandatory for the system
to be nanced?
No it is not mandatory. It is left to the borrower to
decide in favor of or against a policy. However,
the policy that is popular with an individual
bank may be followed.
SELCO Incubation Centre 35
The idea that has germinated and bloomed in
the state of Karnataka now has to reach far and
wide across all states of India to ensure o-grid
solar systems reach the dark households and
bring a reliable light source into their lives. The
story of SELCO is impossible without the lifeline
of the robust banking network of our country.
The objective of the nancial linkages manual
has been to demystify the roles / procedures
/ stakeholders involved in creating the end
consumer nancing that is crucial to overcome
the upfront high cost of solar home lighting
systems.
8. CONCLUSION
The ability of this solution to impact multiple
more lives is the aim of creating the SELCO
Incubation Centre where we are mentoring
with early stage entrepreneurs who aim to
build their organizations on SELCO principles.
This manual will facilitate knowledge transfer
on the procedures and policies with respect
to nancing for the end consumer. We hope
that this documentation will create many new
stories of newer and far ung communities
that are empowered with lights in their lives.
9. BIBLIOGRAPHY
Access to energy services Case studies
in collaboration with Renewable Energy &
Energy Eciency Partnership (REEEP)
Ashden Awards Case Study 2008 Aryavart
Gramin Bank
Bharatiya Vikas Trust, Manipal manual on
Solar Energy Financing
SELCO Incubation Centre 37
SELCO, a social enterprise established in 1995, provides sustainable energy
solutions and services to under-served households and businesses. It was
conceived in an eort to dispel three myths associated with sustainable
technology and the rural sector as a target customer base:
Poor people cannot aford sustainable technologies
Poor people cannot maintain sustainable technologies
Social ventures cannot be run as commercial entities
SELCOs current product oerings include solar PV lighting systems, water
heating systems, cook stoves and other customized products to meet specic
needs. SELCO currently employs about 170 employees in Karnataka and Gujarat
spread across 25 energy service centers. Since 1995, SELCO has sold, serviced
and nanced over 125,000 solar systems to its customers. SELCOs investors,
all social, include E+Co, The Lemelson Foundation and The Good Energies
Foundation.
S3IDF
The Small Scale Infrastructure Development Fund (S3IDF) is a non-prot
organization that addresses poverty alleviation in developing countries
through two mission objectives:
To employ its Social Merchant Bank Approach (SMBA) in India to build
micro-, small-, and medium-scale enterprises that positively impact the poor
and the environment
To promote, disseminate, and transfer the SMBA to achieve a broader and
greater impact within poor communities by enabling other development
institutions to leverage both philanthropic and development capital to facilitate
local commercial co-nancing for micro-, small-, and medium-scale enterprises
that explicitly benet the poor.
S3IDF-India was established by S3IDF-US in 2003 in order to apply and verify its
innovative SMB approach for developing a portfolio of small-scale sustainable
infrastructure investments. Over the past 8 years, in India, S3IDF has helped
develop 185 projects (project investments ranging from $ 1000 to $ 20,000)
providing sustainable infrastructure services with local job creation and
additional livelihood options. These projects directly or indirectly benet in
excess of around one hundred thousand people (as a result of being users of
infrastructure services, or having enhanced income). Via a revolving fund, this
portfolio has achieved leverage in excess of 2.5 i.e. for every dollar invested by
S3IDF approximately $ 2.5 was invested by local nancial institutions, raised
through development capital or as local equity. In order to develop these
projects, S3IDF has worked in partnership with 12 nancial institutions, 29
technology suppliers and over 20 grass-root level organizations.
SELCO Incubation Centre 39
SELCO Incubation Centre
The mission of SELCO Incubation Centre is to nurture & empower the
next generation of sustainable energy entrepreneurs for the under-served
communities. The initiative will be leveraging on the eighteen years of
experience to catapult a new league of SELCOs across India. We will seek to
utilize SELCOs shared resources, management expertise, intellectual capital,
and learning to enhance the capacity of potential local energy enterprises to
deliver energy solutions to low-income communities by:
Replicating decentralized business models and processes
Providing mentorship in social enterprise management and business
planning support
Assisting in developing the enabling conditions to support delivery of
energy services
Enabling access to seed and later stage capital
Establishing a platform for networking, sharing of best practices, common
sourcing, etc.
Supported By:
GIZ ADB: Energy for all
Doen Foundation
The Swiss Agency for Development and
Cooperation (SDC)
#263, AECS Layout
1st cross, Kundalahalli
Bangalore-560 037, India
Ph: +91 80 4120 1681
email: info@selcoincbation.org
www.selcoincubation.org