Niti Aayog has proposed the Reserve Bank of India (RBI) to classify loans for purchasing electric vehicles under the priority sector lending (PSL) division.
Under the PSL framework, lenders must loan at least 40% of their total credit to certain industries. Agriculture, export credit, small companies, housing, education, social infrastructure, and renewable energy are among these sectors. The banking regulator uses PSL to allocate funds to credit-starved industries.
If RBI accepts the proposal, loans for EV will be made available at a cheaper interest rate. As of now, these loans are considered under the auto-retail category and lenders are apprehensive about loans for electric vehicles, because the sector is still in the developing phase.
According to the CEO of Niti Aayog, Amitabh Kant, the suggestion came from the government’s policy think tank, and it examined the potential of EVs in decreasing greenhouse gas emissions and assisting India in its battle against climate change.
“The inclusion of EVs under PSL will not only lower credit costs but also give funding to more individuals, hence expanding EV adoption in India,” Kant told ET. “In light of the coming climate change problem and India’s recent promises at COP26 in Glasgow, we believe there is a basis for this.”
At the Glasgow Climate Change Conference last month, India committed to decreasing total projected carbon emissions by 1 billion tonnes by 2030, lowering the carbon intensity of the economy by less than 45%, and achieving net-zero emissions by 2070.
Kant stated that the goal of expanded accessibility and lower financing costs for EVs can only be attained via careful examination and participation in the process of their inclusion under PSL.
People in the know say that makers of electric two- and three-wheelers also have sought the banking regulator for PSL status.
Although EV sales in the country are surging and have already surpassed the previous year’s margin, Sulajja Firodia Motwani, CEO of electric two- and three-wheeler producer Kinetic Green Energy & Power Solutions believes that EV financing remains a “weak link” in the EVs’ development narrative because there are only a few financiers of EV and their interest rates are exorbitantly high.
EV sales more than tripled to 118,000 units in the first half of the current fiscal year, despite a scarcity of semiconductors forcing automakers to reduce the manufacturing of vehicles powered by fossil fuels, affecting sales.
