The Union Department of Transport is spearheading the campaign to get the industry a priority sector label from the Reserve Bank of India (RBI). Sources say the industry could achieve preferred funding status within the next six months.
Several fintech companies – Rev Fin, Oto Capital and Three Wheels United – have taken the lead in financing electric vehicles. These financial companies have seen their volumes increase by at least 5 to 8 times since mobility restrictions were eased, officials said.
“Over 85% of our customers have never taken out a loan and have no credit history,” said Sameer Aggarwal, founder of RevFin Services, a digital lending platform. “It is all the more difficult to underwrite such customers. Yet, through the use of biometric and psychometric parameters, we study the personality and repayment patterns of each customer. We see a drop in NPAs.”
Fintech companies co-lend with banks, offer innovative financing programs such as the ability for customers to retire from electric vehicles within 12-24 months of purchase, and reduce EMIs through interest rates attractive. “As more and more fintech companies are underwriting assets, we have begun to play a bigger role in financing electric vehicles, particularly in the retail sector for individuals, where payment defaults can be lower,” said Sumit Chhazed, co-founder of OTO Capital. We financed 3,000 electric vehicles in FY22 compared to 200 in FY21, he said.
In the meantime, the electric vehicle finance industry is expected to gain preferred priority sector status within the next 3-6 months, two people familiar with the development said.
Government sources said work is in full swing in this regard with Transport Minister Nitin Gadkari spearheading the initiative.
The inclusion of electric vehicles under
will not only reduce the cost of finance, but will also provide finance to more people, thereby increasing the penetration of electric vehicles in India, a measure that will also help to reduce imports of fossil fuels. Sources close to the central bank said the matter was under consideration.
Non-bank lenders, including
Shriram Citi Union, Mahindra Finance, , L&T Finance and similar banks have started financing electric vehicles.
Experts say this is a welcome change as until recently banks and NBFCs focused on financing conventional vehicles.
These lenders expect electric vehicles to trigger new market activity and drive loan demand. Having financing options will make these vehicles more affordable and help attract cost-conscious rural buyers, experts say.
“With the basic electric vehicle policy in place, the priority areas that are now being strengthened are charging infrastructure, battery swapping, financing, etc.,” said Sulajja Firodia Motwani, managing director of the maker of two and three electric wheels Kinetic Green Energy & Power. Solutions, which has linked up with RevFin.