Niti Aayog

Niti Aayog proposes to include EVs in RBI’s priority-sector lending guidelines

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admin January 26, 2022
Updated 2022/01/26 at 2:28 PM

The NITI Aayog has proposed that the government include electric vehicles in the Reserve Bank of India’s priority-sector lending guidelines, claiming that this would boost retail financing for EVs significantly.

According to the NITI Aayog’s report on EVs with Rocky Mountain Institute (RMI) and RMI India, which was released on Friday, 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 by 2030.

“However, retail funding for electric vehicles has been reluctant to take off,” it stated.

“Financial institutions have a critical role to play in speeding the adoption of electric vehicles in India and supporting road transport decarbonization,” said Amitabh Kant, CEO of NITI Aayog.

“The PSL mission of the Reserve Bank of India has a track record of increasing the provision of formal credit to sectors of national importance. It has the potential to create a substantial regulatory incentive for banks and NBFCs to expand their EV financing, “Kant added.

Priority-sector lending in India strives to increase financial access and enhance job prospects.

According to the study, in order to achieve these goals, the Aayog suggests that the RBI investigate different EV sectors and use cases based on five parameters: socioeconomic potential, livelihood generation potential, scalability, techno-economic feasibility, and stakeholder acceptability.

According to the report, “Buyers of electric vehicles are unable to obtain low-interest rates and long loan terms because banks are concerned about resale value and product quality,” “According to Clay Stranger, managing director of RMI, priority-sector lending can encourage banks to accelerate India’s transition to electric vehicles and help the country meet its 2070 climate goals.

According to the Niti Aayog, electric two-wheelers, three-wheelers, and commercial four-wheelers are among the first categories to be prioritised under PSL.

It also advises that the ministry of finance recognise EVs as an infrastructure sub-sector, as well as the inclusion of EVs as a distinct reporting category under the RBI.

“Multipronged solutions like these are required not just for EV adoption and businesses, but also for the financial sector and India’s net-zero target of 2070, “it said.

The research also suggests a defined sub-target and penalty mechanism for priority sector financing for renewable energy and EVs to maximise the effect of their inclusion.

“Moving ahead, ensuring the rules proposed can successfully promote EV investment in India would need the involvement of other ministries and industry players,” it noted.

 

Source: The Economic Times

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