Include electric vehicles in RBI priority sector lending guidelines: Niti Aayog report
“The inclusion of EV retail lending has the potential to boost investor confidence by providing a market signal of the government’s continued commitment to the sector,” according to the Niti Aayog, RMI and RMI India report unveiled. Friday,
“It can also ensure a quick and fair transition by mandating financial institutions to direct credit to segments and use cases where the credit gap persists despite compelling economic conditions,” the report said.
To operationalize the concept of including electric vehicles in lending to priority sectors, central government policymakers can liaise with the Reserve Bank of India to design and issue the required guidelines.
Financial institutions and the electric vehicle ecosystem can contribute by outlining how the inclusion of PSL can influence their growth and investment plans, the report says.
“While this intervention is promising, it alone will not solve financing challenges and various lingering risks to electric vehicle financing remain. Additional policy and market measures to address these challenges include state-level tax incentives, open vehicle performance data, industry-led buy-back programs, and loan guarantee mechanisms,” according to The report.
He said cumulative investments in electric vehicle (EV) transition in India could reach 19.7 lakh crore ($266 billion) between 2020 and 2030, highlighting the need for higher liquidity and cost. lower capital for EV assets and infrastructure.
The report states that given the early stage of technology and adoption of electric vehicles, banks and non-banking financial companies (NBFCs) are not lending to electric vehicles due to the risks associated with the assets and the business model. These risks are both real (eg uncertainty of resale value) and perceived (eg product quality).
Therefore, if financing is available, buyers of electric vehicles cannot obtain terms (i.e. interest rates and tenure terms) comparable to ICE vehicles, according to the report.