In a push to accelerate the adoption of electric vehicles (EVs), the Finance Industry Development Council (FIDC) has urged the government to implement incentives similar to the FAME and Production-Linked Incentive (PLI) schemes, but this time aimed at the financing sector. This comes after recognizing that the lack of financial support for EV loans is a key obstacle in promoting the switch to electric mobility in India.
The council emphasized that, while manufacturing incentives for electric vehicles have been successfully introduced through schemes like FAME, a similar approach is needed to support financial institutions offering loans for EV purchases. They believe that without such support, non-bank financial companies (NBFCs) will continue to face challenges in financing EVs at scale.
One of the key issues raised by FIDC is the similarity in treatment of EV loans to conventional vehicle financing, which currently offers no incentives for lenders. Moreover, concerns about battery technology, resale value, and depreciation risks related to evolving EV technology further complicate financing efforts. This uncertainty has created a bottleneck in the expansion of EV finance options.
To address these challenges, the FIDC has proposed the establishment of a dedicated fund for NBFCs, with potential backing from SIDBI or NABARD, that would offer subsidized interest rates on EV loans. This move is expected to boost the availability of affordable EV loans, helping both financiers and customers overcome the barriers to EV adoption.
With rapid technological advancements in EV batteries, the need for standardization and data on battery degradation in Indian conditions has also been highlighted. The FIDC’s recommendations, if implemented, could provide much-needed clarity and security for lenders, facilitating greater investment in the growing EV market.
