What is the Full Form of PSLC in Banking?

Thе Full Form of PSLC in Banking is Priority Sector Lending Certificates (PSLC). PSL certificates are used to support Indian banks in meeting their loan targets by borrowing against such PSL certificates. The Reserve Bank of India has stipulated that every bank, whether local or foreign, is supposed to do some public sector lending or lending to certain sectors and sub-sectors of the economy. The PSLC helps banks safeguard against shortfalls as they extend credit to underrepresented groups and underperforming sectors. Essentially, these are social credits that support comparative advantages as the Indian banks implement their PSL obligations. PSLCs seek to enhance market efficiency and create employment opportunities in identified sectors. They ensure the existence of a strong market infrastructure and enhance the overall competitiveness of the economy.

Sеctors and Sub-Sеctors Involvеd with PSLCs

The RBI identifies multiple sectors for PSLCs, including but not limited to lending for allied support, small and micro businesses, housing for the underprivileged, education, and other low-income groups in need of financial assistance. The RBI requires that PSL should constitute around 40% of Adjusted Net Bank Credit (ANBC) or the credit equivalent of off-balance sheet exposure, whichever is higher. Specific sub-targets within PSL include agriculture, which receives 18% of the total, with 8% going to small farmers and 7.5% to small businesses. This applies to all domestic banks and foreign banks (with national ties) and 20 or more branches.

Typеs of PSLC

There are four typеs of PSLCs:

PSLC Agriculture: This category contributes toward the aggregate agriculture lending target and covers all eligible agriculture loans, excluding the lending for Small and Marginal Farmers, which is covered under separate certificates.

PSLC SF/MF: This includes all eligible loans extended to small and marginal farmers. Such credit will count towards the SF/MF sub-target, agriculture target, and overall PSL target.

PSLC Micro-Enterprises: This accounts for all the eligible loans to micro-enterprises, hence forming part of the aggregate micro-enterprise sub-target and PSL target.

General PSLC: This class would represent residual PSLs to sectors other than agriculture and micro-enterprises, for which separate certificates are issued, toward the overall achievement of the PSL target.