Current · Source: Reserve Bank of India · RBI/2010-11/411 · issued 21 Feb 2011 · ~1 min read
Quick answerRBI exempts loans under JNNSM's solar scheme from base rate guidelines if interest is ≤5% and GoI refinance of 2% is available. Banks can offer subsidised loans to entrepreneurs without breaching base rate rules.
The rule, in the simplest words
Banks can offer loans under JNNSM's solar scheme at ≤5% interest without breaching base rate rules.
The loan must be backed by 2% refinance from the Government of India (GoI).
Lenders must ensure the 5% cap and refinance condition are met to avoid base rate violations.
How it plays out — a real example
Rahul, a forex & trade-finance officer in Indore, is approached by an entrepreneur seeking a loan for a solar project. Rahul checks if the loan meets the JNNSM scheme's criteria, including a 5% interest rate and 2% refinance from the GoI. Satisfied that the loan complies with RBI guidelines, Rahul offers the subsidised loan to the entrepreneur, helping them finance their renewable energy project.
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
❓ Common questions
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).
📜 Read the original circular — full text as issued by RBI
RBI/2010-11/411
DBOD.Dir.BC. 81/13.03.00/2010-11
February 21, 2011
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir / Madam
Guidelines on Base Rate
Please refer to our circular No. DBOD.Dir.BC.88/13.07.001/2009-10 dated April 9, 2010 and our letter DBOD.Dir.No. 21957/13.07.001/2009- 10 dated June 24, 2010 addressed to IBA on the subject.
2. Government of India, Ministry of New and Renewable Energy (MNRE) has formulated a scheme on financing of Off-Grid and Decentralised Solar (Photovoltaic and Thermal) applications as part of the Jawaharlal Nehru National Solar Mission (JNNSM). Under the scheme, banks may extend subsidised loans to entrepreneurs at interest rates not exceeding five per cent where refinance of two per cent from Government of India is available. In this context, we advise that such lending at interest rates not exceeding five percent per annum where refinance of Government of India is available, would not be considered to be a violation of our Base Rate Guidelines.
Yours faithfully,
(P. R. Ravi Mohan)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-11/411 · issued 21 Feb 2011. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (All scheduled commercial banks (excluding RRBs), Entrepreneurs seeking financing for off-grid solar applications, Branches handling renewable energy lending), your first concrete step on “Base Rate Exemption for Solar Loans Under JNNSM” is: “Verify that loans under this scheme carry interest ≤5% per annum and have GoI refinance of 2%.” (RBI issued this 21 Feb 2011).
Circular: RBI/2010-11/411 -- Base Rate Exemption for Solar Loans Under JNNSM
Issued: 21 Feb 2011
Action required: Verify that loans under this scheme carry interest ≤5% per annum and have GoI refinance of 2%.
Action required: Ensure loan documentation clearly references the JNNSM scheme and refinance availability.
Action required: Monitor that no other loans are priced below base rate without similar exemptions.
Action required: Train lending staff on this specific exemption to avoid inadvertent base rate breaches.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6270&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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