The World Bank and India’s government are currently in discussions to create a risk-sharing mechanism that will compensate banks for lending to electric vehicle purchases. This is part of India’s efforts to decarbonize its transport sector.
India’s G20 Sherpa Amitabh Kant stated that the risk instrument will allow banks to hedge against loan defaults as well as reduce the cost of financing electric vehicles. He spoke at an industry event in New Delhi. Kant, who was the CEO of NITI Aayog, led state policy decisions throughout the economy.
Due to the slow adoption of battery-powered cars, the South Asian nation’s transition to clean transport is more difficult than in China and the US. These vehicles are expensive and there are not enough charging stations. This is partly why India is slower than the US and China in moving to clean transport. Kant was recently appointed India’s chief negotiator as it assumes the Chair for the Group of 20 nations in December.
According to a senior NITIAayog official, the World Bank will establish a $1 billion joint fund with an Indian bank. This fund will be available to all financial institutions. The fund will offer first-loss guarantees for lenders in case loans default.
A spokesperson for India at the World Bank did not respond to emails and calls.
India is pushing to decarbonize the transport sector. This sector accounts for 13.5% of India’s total emissions. India hopes to reach its goal of being net carbon zero by 2070. From $6 billion in 2021, the government anticipates that investments in India’s EV industry will more than triple to $20 Billion by 2030.
To encourage the adoption of electric scooters as well as rickshaws, the government is working on a battery swap program. These are growing at a faster rate than the four-wheeler market.