EV, green hydrogen may come under priority sector lending: Govt Official

Power ministry has asked EV to be included under priority sector lending in a letter.

Electric vehicles and non-conventional energy including green hydrogen may come under priority sector lending with the proposal under discussion by the Finance Ministry, a senior government official said.

The proposal sent by the Power Ministry will be discussed with the Reserve Bank of India (RBI) and a review of the priority sector lending is on the cards, he added.

“Power ministry has asked EV to be included under priority sector lending in a letter. We will talk to the RBI. There will be a detailed examination and a review of the priority sector lending. Other non conventional energy including green hydrogen are also seeking inclusion under priority sector lending,” the official said.

Under the rules, a banking entity needs to lend 40 percent of the adjusted net bank credit to the so-called priority sector or economically weaker sections. Sections like agriculture, micro, small and medium enterprises, export credit, education, housing, social infrastructure, renewable energy, etc., are included for lending purposes under PSL.

The apex bank’s norms are applicable to all the commercial banks, small finance banks (SFBs), cooperative banks and foreign banks.

Mooted by the then Finance Minister Morarji Desai in 1966, the Reserve Bank of India (RBI) brought in priority sector lending (PSL) norms for banks in 1972 to boost credit access to and development of economically weaker sections.

Other than lending, the priority sector lending norms also prescribe banks to ensure that the loans extended under it are for approved purposes and the end use is continuously monitored. For this, banks are advised to put in place a proper internal control system.

For compliance and monitoring purposes, banks are also required to submit data on lending to the RBI’s Financial Inclusion and Development Department.

If a bank fails to meet the target prescribed under the PSL norms, it has to deposit the allocated amount for contribution to the Rural Infrastructure Development Fund (RIDF) established with the National Bank for Agriculture and Rural Development as decided by the apex bank from time to time.

Also, the PSL norms clearly mention that any non-achievement of the prescribed targets under PSL is considered while granting regulatory clearances or any approvals for various purposes.