SBI Research has recommended revamping the Priority Sector Lending framework by expanding support for renewable energy, electric vehicles, climate finance, and infrastructure to accelerate India's clean energy transition and Viksit Bharat 2047 vision.
While the overall 40 per cent priority sector lending (PSL) target has been comfortably achieved by banks, the framework needs to be thoroughly overhauled to meet India's Viksit Bharat 2047 goals, SBI Research reported. The report suggests that the emerging sectors of renewable energy, electric mobility, climate finance, ESG investing, and infrastructure financing should be part of the PSL architecture in order to assist India's long-term economic transformation.
In the renewable energy segment, SBI Research suggested that the eligible loan limit for renewable energy projects be increased almost three times from the current ₹35 crore to ₹100 crore by the Reserve Bank of India. The report has recommended a rise in the loan limit for rooftop solar installations for individual households from ₹10 lakh to ₹2 crore. It said although policy support has been provided, the outstanding renewable energy loans have increased at just 9 per cent CAGR over the last five years, which signals the need for better credit support for boosting the clean energy transition in India.
The report has also suggested making the EV manufacturing ecosystem PSL-centric by expanding the current PSL sub-target of 7.5 per cent to cover financing for MSMEs in the electric vehicle manufacturing industry and the electric vehicle component manufacturing industry.
It also recommended a new "Climate Sustainability Finance" category in the PSL framework to mobilise credit for climate action projects, as well as including banks' investments in green bonds, ESG bonds, and sovereign green bonds in the PSL framework.
The report has also recommended giving priority sector status to all infrastructure loans or exempting infrastructure lending from the Adjusted Net Bank Credit (ANBC) framework followed for priority sector lending, noting that massive long-term investments in infrastructure will be needed to fulfil the vision of Viksit Bharat 2047.
The report added that banks should be encouraged to finance projects that support India's efforts to address climate-related risks.
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