Banks may soon classify loans for electric vehicles and renewable hydrogen under priority sector lending (PSL). According to a report in the Economic Times (ET), several banks have urged the move to the Reserve Bank of India (RBI).
According to the reports, banks allegedly advised the RBI that classifying these loans as priorities will assist close the “financing shortages” in these industries.
Additionally, it will aid banks in achieving their PSL goals. Currently, banks are mandated to lend to priority industries for 40% of their total loan.
Eight sectors currently qualify for loans using the PSL procedure. They consist of the sectors for agriculture, MSMEs, export financing, housing, education, renewable energy, and social infrastructure.
In September, the Indian Banks’ Association (IBA) established a committee to study “sustainable financing,” with an emphasis on Environmental, Societal, and Governance (ESG) challenges.
Experts have nevertheless advised caution, saying that “greenwashing” the loans needs to be done properly and with checks. According to an expert, investing in a company that makes false promises about using recycled materials could lead to funds designated for sustainable finance being misdirected.
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