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What is the news?
NITI Aayog, Rocky Mountain Institute (RMI), and RMI India have released a report, titled ‘Banking on Electric Vehicles in India’.
What is the purpose of the ‘Banking on Electric Vehicles in India’ Report?
The report provides considerations and recommendations to inform the inclusion of Electric Vehicles(EVs) in the Reserve Bank of India’s (RBI’s) priority-sector lending (PSL) guidelines.
What are the key highlights of the report?
Banks and non-banking financial companies (NBFCs) in India have the potential to achieve an electric vehicle (EV) financing market size of Rs 40,000 crore by 2025 and Rs 3.7 lakh crore (USD 50 billion) by 2030.
But the retail finance for EVs has been slow to pick up. This is because buyers of EVs are unable to access low-interest rates and long loan tenures for EVs as banks are concerned about resale value and product quality.
Hence, to solve these financing challenges in EVs:
– RBI can consider including Electric Vehicles in Reserve Bank of India’s priority sector lending (PSL) guidelines. This inclusion can provide a strong regulatory incentive for banks and NBFCs to scale their financing to EVs. It also has the potential to increase investor confidence. Initially, electric two-wheelers, three-wheelers and commercial four-wheelers can be prioritized under PSL.
– Moreover, the report also recommends a clear sub-target and penalty mechanism for priority sector lending to renewable energy and EVs.
– It also suggests recognition of EVs as an infrastructure sub-sector by the Ministry of Finance and the incorporation of EVs as a separate reporting category under the RBI.
Source: This post is based on the article ‘NITI Aayog, Rocky Mountain Institute (RMI) and RMI India release “Banking on Electric Vehicles in India” report’ published in PIB on 22nd January 2022.
