What is the News?
NITI Aayog and Rocky Mountain Institute(RMI) India jointly releases a new report titled ‘Mobilising Electric Vehicle Financing in India’.
Purpose of the Mobilising Electric Vehicle Financing in India report:
- The report highlights the role of finance in India’s transition to electric vehicles(EVs). Further, the report also identifies solutions for capital and financing to aid in India’s EV transition.
What does the report say about Electric Vehicle Financing?
India’s Electric Vehicle ecosystem has so far focused on overcoming adoption hurdles. These hurdles are associated with technology cost, infrastructure availability, and consumer behaviour. However, financing is the next critical barrier that needs to be addressed to accelerate India’s electric mobility transition.
- According to the report, the transition to Electric Vehicles(EVs) will require a capital investment of over 19 lakh crore rupees. This has to be spent on electric vehicles, charging infrastructure, and batteries over the next decade.
- Moreover, India’s Electric Vehicle financing industry is projected to be Rs 3.7 lakh Crore in 2030. It is about 80% of the current size of India’s retail vehicle finance industry.
Suggestions: The report has provided several solutions that financial institutions can adopt in catalysing Electric Vehicle financing.
- Inclusion of EVs in Priority sector lending (PSL): Reserve Bank of India(RBI) can include EVs in PSL guidelines. This would incentivise banks to increase lending towards the sector.
- Interest rate subvention: Government can provide interest rate subventions to make loans affordable. This has already been enacted in other sectors and at a state level. For example in Delhi.
- Product guarantees and warranties: The manufacturers of EVs can provide guarantees and warranties on the performance of their products. This would improve their bankability.
- Risk-sharing mechanism (government and multilateral-led): Partly or entirely covering the possible losses associated with Electric Vehicle financing can build trust in the sector.
- Secondary market development: Government can help develop a secondary market for electric vehicles. This will improve the resale value of EVs and improve their bankability.
- Digital lending: The loans for EVs can be provided digitally. This will help in overcoming the operational and logistical challenges of Electric Vehicle financing.
- Open data repository for EVs: Financial Institutions(FIs) need access to data on EV specifications, actual charging costs, and operating expenditures. This will help institutions accurately assess risk, determine appropriate interest rates, and design effective leasing programmes.