Definition
Priority Sector Lending Certificates (PSLC)
Priority Sector Lending Certificates are tradable instruments that let banks meet PSL targets by buying the priority-sector lending achievement of other banks.
PSLCs allow a bank that has lent above its PSL requirement to sell the surplus as a certificate to a bank falling short, without transferring the underlying loan or risk. The buyer earns priority-sector credit; the seller earns fee income.
The RBI runs the PSLC platform, and trading volumes have grown into lakhs of crores annually. PSLCs make the priority-sector regime more efficient, letting banks specialise in segments they understand while still meeting regulatory targets.
Related terms
- Adjusted Net Bank Credit (ANBC)Adjusted Net Bank Credit is the base on which a bank's priority sector lending targets are calculated, derived from its net bank credit with certain adjustments.
- Microfinance Institution (MFI)A Microfinance Institution provides small, collateral-free loans to low-income borrowers, typically women in groups, for income-generating activities.
- Priority Sector Lending (PSL)Priority Sector Lending norms require banks to direct a minimum share of their credit to sectors such as agriculture, MSMEs and weaker sections.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.