Home » Report of ‘Banking on Electric Vehicles in India’

NITI Aayog, Rocky Mountain Institute (RMI), and RMI India released a report, titled ‘Banking on Electric Vehicles in India’, which outlines the importance of priority-sector recognition for retail lending in the electric mobility ecosystem.
The report provides considerations and recommendations to inform the inclusion of EVs in the Reserve Bank of India’s (RBI’s) priority-sector lending (PSL) guidelines.
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.

Financial institutions have an important role to play in accelerating the adoption of EVs in India and supporting the decarbonisation of road transport.
“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.”
Priority-sector lending aims to expand financial access and support employment opportunities in India.

In order to meet these goals, the report highlights that the 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.
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.

report indicates that electric two-wheelers, three-wheelers, and commercial four-wheelers are early segments to prioritise under PSL.
Moving forward, the engagement of other ministries and industry stakeholders will be important to ensuring the guidelines designed can effectively enhance EV investment in India.
To maximise the impact of the inclusion of EVs, the report also recommends a clear sub-target and penalty mechanism for priority sector lending to renewable energy and EVs.
Furthermore, it 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 are needed not only for EV penetration and businesses, but also for the financial sector and India’s 2070 net-zero target.

Outline the structure, mechanics, and history of PSL
Propose considerations to inform the design of guidelines for including EVs in the PSL guidelines
Summarise actions needed to implement and ensure the success of EVs as a priority sector

investment, and innovation are driving India’s rapidly increasing EV adoption. Finance will be critical to achieving scale.
However, the real and perceived risks of a relatively new asset class have meant that financial institutions like banks and NBFCs have not yet built up their confidence or capabilities of financing the sector.
India’s EV finance market could reach INR 3.7 lakh crores ($US50 billion) in advances by 2030.47 Priority sector lending can be a crucial pathway to helping realise this potential.
If designed well, it can incentivise banks to finance EVs and improve finance for NBFCs, while institutionalising the importance of the EV sector within the financial industry.
Considering socioeconomic potential, livelihood generation potential scalability, technoeconomic viability, and stakeholder acceptability, market-ready electric 2Ws, 3Ws, and commercial 4Ws currently offer the ideal starting point for PSL inclusion.

The NITI Aayog (National Institution for Transforming India) serves as the apex public policy think tank of the Government of India, and the nodal agency tasked with catalyzing economic development, and fostering cooperative federalism through the involvement of State Governments of India in the economic policy-making process using a bottom-up approach.
Chairman – Narendra Modi
Vice Chairman – Rajiv Kumar
CEO – Amitabh Kant

RMI is an independent nonprofit founded in 1982 that transforms global energy systems through market-driven solutions to align with a 1.5°C future and secure a clean, prosperous, zero-carbon future for all.
The system work in the world’s most critical geographies and engage businesses, policymakers, communities, and NGOs to identify and scale energy system interventions that will cut greenhouse gas emissions at least 50 percent by 2030.

Report of ‘Banking on Electric Vehicles in India’