Release of ‘Banking on Electric Vehicles in India’ Report
Part of: Prelims and Mains GS-III: Indian Economy; Infrastructure
In News: A report titled ‘Banking on Electric Vehicles in India’ was released.
By: NITI Aayog, Rocky Mountain Institute (RMI), and RMI India
Objective:
Outlines the importance of priority-sector recognition for retail lending in the electric mobility ecosystem
Provides considerations and recommendations to inform the inclusion of EVs in the Reserve Bank of India’s (RBI’s) priority-sector lending (PSL) guidelines.
Retail finance for EVs
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 (USD 5 billion) by 2025 and Rs 3.7 lakh crore (USD 50 billion) by 2030. However, retail finance for EVs has been slow to pick up.
RBI’s PSL mandate has a proven track record of improving the supply of formal credit towards areas of national priority. It can provide a strong regulatory incentive for banks and NBFCs to scale their financing to EVs.
Buyers are unable to access low-interest rates and long loan tenures for EVs as banks are concerned about resale value and product quality. Priority-sector lending can encourage banks to fast-track India’s transition to EVs and help achieve our 2070 climate goals
RBI may consider various EV segments and use cases based on five parameters: socio-economic potential, livelihood generation potential, scalability, techno-economic viability, and stakeholder acceptability.
Recommends a clear sub-target and penalty mechanism for priority sector lending to renewable energy and EVs
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.
Multiprong solutions such as these will also help India achieve its 2070 net-zero target.
