Some banks in India have proposed introducing loans towards electric vehicles (EVs) and green hydrogen projects to the priority sector lending (PSL) list, as reported by Economic Times on October 10. According to these banks, classifying such loans under the PSL scheme could fill financing gaps in these sectors and help lenders meet their PSL targets. Last month, the Indian Banks’ Association (IBA) set up a working group comprising representatives of about 18 key banks to process issues of sustainability and green financing. The working group will study the suggestions for expanding the PSL list and submit a formal representation to the regulator.

India’s PSL scheme is intended to provide financial assistance to sectors that may not otherwise receive timely and adequate credit. Banks are required to provide 40% of their adjusted net bank credit to priority sectors. At present, the PSL scheme covers eight sectors, including agriculture, micro and small medium enterprises, export credit, housing, education, renewable energy, and social infrastructure. Aside from financial support from the banking system, the EV industry can also enjoy subsidies under India’s Production-Linked Incentive (PLI) scheme, which offers incentives to eligible manufacturers of EV and hydrogen fuel cell vehicles and relevant component producers. Moreover, the Indian government is mulling a new PLI scheme to award the manufacturing of electrolyzers used to extract hydrogen from water, in a move to realize India’s goal of becoming a hub for green hydrogen.

Sources:

https://economictimes.indiatimes.com/industry/renewables/banks-for-including-electric-vehicles-green-hydrogen-in-priority-lending/articleshow/94770225.cms

https://www.macrothink.org/journal/index.php/ajfa/article/view/75

https://www.financialexpress.com/industry/banking-finance/iba-forms-key-working-group-of-banks-on-sustainability/2687854/

https://www.moneycontrol.com/news/technology/auto/how-the-new-pli-scheme-is-likely-to-boost-the-ev-industry-7476941.html

https://www.livemint.com/industry/energy/electrolyzer-pli-to-spur-green-hydrogen-output-in-the-works-11650479782392.html