India’s banking regulatory body, The Reserve Bank of India (RBI) is reportedly contemplating a proposal submitted by the public policy think tank, NITI Aayog, to categorize loans for purchase of electric vehicles (EVs) under priority sector lending (PSL) segment.
Upon receiving approval, the EV loan segment will be able to get credit at lower interest rates.
While these loans are given under the category of auto retail, lenders have been cautious in financing them as they are unsure about the risks in a segment that is still in its emerging stage.
Confirming the submission of the proposal, NITI Aayog CEO, Amitabh Kant stated that electric vehicles have the potential in reducing greenhouse gas emissions and will also be able to help India in fighting against climate change.
Mr. Kant explained that the inclusion of EVs under the PSL segment will reduce the cost of finance in purchasing while also providing financial aid to more people for the EV market to grow bigger in India.
He believes that the proposal is a fitting response when considering the impending climate change crisis, as well India’s commitments at the recently held COP26 in Glasgow.
For the unversed, at the Glasgow Climate Change Conference held last month, India had set a target for itself in lowering the total projected carbon emissions by 1 billion tonnes till 2030 in order to reduce the carbon density of the country’s economy to less than 45% and also cut its emissions to net-zero by 2070.
RBI is yet to make a comment on the subject.
Sulajja Firodia Motwani, CEO of Kinetic Green Energy & Power Solutions, says that even though sales for EVs are on the rise, financing for the sector has proved to be a weak link in its growth, with only a few banks offering financing at high interest rates.
Notably, the NITI Aayog is also working with World Bank to set up a first loss risk-sharing instrument worth $300 million to improve financing for EVs, with the State Bank of India as program manager.