The Indian government is jointly considering a proposal with the Reserve Bank of India (RBI) to include electric vehicle (EV) infrastructure loans in banks’ priority sector lending, a senior finance ministry official said on Saturday. He also said there was also a proposal to raise the retirement age for chairman, managing director and CEO and executive directors of public sector banks.
“The Ministry of Financial Services has received a notification from the Ministry of Power to include electric vehicle infrastructure in loans to priority sectors. We will see what can be done,” the official said, adding that for this, the RBI will have to restructure the entire Priority Sector Lending Facility.
RBI norms require each bank to provide 40% of the adjusted net bank credit or credit-equivalent amount, whichever is higher, to the priority sector. Under this mechanism, eight sectors including agriculture. This follows a January 2022 report by NITI, RMI and RMI India that highlighted the need for higher liquidity and lower cost of capital for EV assets and infrastructure. The cumulative investment in India’s electric vehicle (EV) transition between 2020 and 2030 could be as high as Rs 1,970 crore, the report said.
The official also revealed that there is a proposal to raise the retirement ages for the chairman, managing director and chief executive officer and executive directors, which are currently 62 and 60, respectively. The retirement age for the SBI Chairman is 63 years. “We haven’t decided on the duration of the increase,” he said, but suggested it could be as long as two years. The development came when there was talk of extending the term of SBI chairman Dinesh Kumar Khara.
Capital of PSU General Insurance Company
At the same time, the official made it clear that there are no plans to recapitalize general insurers in the public sector. “We don’t think there’s a need for that right now. In fact, one of the general insurers might pay a dividend,” he said. General insurance companies include New India Insurance Company, United India Insurance Company, Eastern Insurance Company and National Insurance Company. Among them, New India is in a better position.
Earlier this year, ICRA estimated the capital requirement for three PSUs (excluding New India) to be sizable at Rs 17,200-17,500 crore to meet a solvency of 1.50 times by March 2024, assuming 100% inclusion of FVCA (Fair Value Changes) account) within the available solvency margin ratio. Excluding this, the capital requirement would be higher at Rs 31,500-31,700 crore.