Bring EV financing under priority sector lending: NITI Aayog

To boost electric vehicle penetration in India, NITI Aayog has recommended the Reserve Bank of India to allow banks to finance EVs under the priority sector lending category.

Business Desk, ETV Bharat: In a bid to boost electric vehicle (EV) penetration in the country, the NITI Aayog has recommended the Reserve Bank of India (RBI) to allow banks to finance EVs under the priority sector lending (PSL) category.

In a report titled ‘Mobilising Electric Vehicle Financing in India’ that was prepared by NITI Aayog in collaboration with Rocky Mountain Institute (RMI) India, the think tank recommended ten solutions to boost EV financing, a NITI Aayog statement said.

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“The 10 solutions recommended in the report include financial instruments such as priority-sector lending,” reads the statement, while adding, “These solutions represent high-leverage areas for interventions in finance, and we believe that many are relevant beyond India.”

The inclusion of EVs under the PSL category would incentivise banks to increase lending towards the sector.

As per the current RBI norms, banks must set apart 40 per cent of net credit towards priority sectors.

Besides, PLS norms allow banks to on-lend to Non-Bank Financial Institutions that in turn finance EVs.

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At present eight categories including agriculture, housing, start-ups and education qualify under the PSL category.

However, priority sector guidelines do not lay down any preferential rate of interest for priority sector loans.

“The rate of interest on bank loans will be as per directives issued by the Department of Banking Regulation of RBI, from time to time,” says an RBI statement.

(Shravan Nune)