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RBI to consider Electric Vehicle Loan as Priority Sector Loan: Niti Ayog’s Approach

Image of RBI considering Electric vehicle loan in india as priority sector loan

In order to accelerate the EV adoption in India, the RBI is considering the proposal of NITI Aayog’s think tank to consider the Electric Vehicle loan under the Priority Sector Loan and ease the process of EV financing in India.


  • RBI to consider the EVs loan as Priority Sector Lending (PSL) segment.
  • Niti Aayog think tank proposed the idea of considering the EVs loan under PSL (Priority Sector Loan).
  • Purchase of the EV under loan will have lower interest rate to cater the EV financing problem in India.

Delhi: Niti Aayog’s chief executive Amitabh Kant has confirmed the proposal of considering the loan for EVs under Priority Sector Lending(PSL) to the RBI and further claimed that this proposal if accepted, will help the EV buyers to purchase their EVs under loan at a very low interest.


EV financing continues to be a barrier for EV adoption in India and as of now, very few banks are financing EVs, and that too, at very high-interest rates.

Banks are very cautious to enter into this market and to provide electric vehicle loans, considering the lower residual value, and instability in the EV technology in India.

In this regard, the Niti Aayog has submitted a proposal to RBI to look into the matter of poor EV financing in India.

With the view that EVs are very effective when it comes to environmental protection, the step has been taken as it would help India to cope up with the current level of pollution. Kant further commented – “The inclusion of EVs under PSL would not only reduce cost finance but also provide finance to more people, thus increasing penetration of EVs in India”

Kant also commented that the inclusion of the EVs under PSL (Priority Sector Loan), will require extensive deliberation and consultation that will lead to a targeted outcome of increased access and reduced cost of finance to EV sectors. 

India at COP26, Glasgow Climate Change Conference final month, has itself set an objective of reducing the overall carbon emission by 1 billion tonnes in the next 10 years, thereby minimizing the carbon intensity of the economy by less than 45% and then making it completely zero by 2070. 

India witnessed a huge trend in the sales of electric vehicles during the first half of FY 2021, where the EV sales tripped to 118,000 units. 

image of the factors driving EV sales in india
EV sales in India surpassed the sales figure of 2020 during the first half of FY 2021

But despite the growth in sales, Bankers are still taking a wait-and-watch approach considering the barriers to EV adoption in India. 

Managing Director of Sundaram finance, Rajiv Lochan said,” There are still many unknowns as Technology, infrastructure and total cost of ownership evolve, and the relative give-gets of financing clarify. We are taking the view that it is wise to take measured steps with a view to learning dynamics before getting to the Electric Vehicle Loan.’”

READ MORE: Financial analysis of Electric Vehicle Sector in India

The inclusion of the Electric Vehicle Loan under the Priority Sector Loan will certainly decrease the interest rates on EV Loans in India. This will increase the number of EV sales tremendously, which will directly be helpful in reducing the carbon emission level, thereby helping India to meet its global objective of reducing pollution in the coming years.

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