Niti Aayog and World Bank’s joint initiative to make financing for EVs easier

In its bid to boost the EV sector, Niti Aayog has been collaboratively working with the World Bank to facilitate a faster and more convenient financial of electric vehicles. The news comes after the lack of enthusiasm of high-street banks due to a small resale market of the EV sector.

The two firms have earmarked a $300-million as the ‘first loss risk sharing instrument’ with State Bank of India as its program manager. This would help them in garnering around $1.5 billion for financing EVs. According to Amitabh Kant, CEO of Niti Aayog, the instrument is also expected to bring down the cost of financing of EVs by as much as 12 per cent.

The funds of the $300 million risk-sharing instrument, which has been institutionalised with SBI, will be available for all financial institutions as a first-loss instrument. Kant added that currently, the rate of interest for electric two-wheelers and electric three-wheelers stands at the range of 20-25 per cent. However, that is expected to come down to 10-12 per cent.

At present, electric vehicles do not have a robust resale market in place, which makes it hard for banks to ascertain their residual value. Result? Higher cost of financing for EVs compared to ICE vehicles and this is what the Think Tank and the World Bank has been looking to resolve.

Moreover, experts on the matter have stated that many EV buyers also lack credit history. “We are not being risk averse, but a lot of these clients are new to credit and from segments which are generally catered to by NBFCs,” said a lender. What is worse is the fact that NBFCs and banks are still not looking at EV financing as a lucrative business opportunity.

Hopefully, the joint initiative by Niti Aayog and the World Bank will open doors of opportunities for the EV market and if not, set example for other financial institutions.

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