Page 48 - Banking Finance April 2023

ARTICLE

PRIORITY

SECTOR

LENDING

CERTIFICATES

(PSLC)

Introduction: efficiency in priority sector lending "to increase employment,
create basic infrastructure and improve competitiveness of
Priority Sector Lending Certificates is a tool for promoting
the economy, thus creating more jobs. Priority Sector
comparative advantages among banks while they meet their
Lending Certificates is a method for directing credit and
priority sector lending obligations in India. "Banks with a
could be used in Asia and other parts of the world as an
comparative advantage in lending to the priority sector
alternative method for directing credit.
should earn priority sector lending certificates [social credits]
while those falling short of the target would be required to
buy priority sector lending certificates [social credits]. A Background:
forward market for Priority Sector Lending Certificates Tradable Priority Sector Lending Certificates was first
[social credits] will help banks to focus and plan well. proposed by Mr. A. M. Godbole in his article "How to lend
more to the poor" (Mint, 28 March 2007). Mr. A. M. Godbole
Total credit extended by banks in priority sector lending was had called tradable Priority Sector Lending Certificates as
INR 21,543,562.9 million (US$322,361 million as of June 'social credits'. On 7 April 2008 (in a draft report) and on 12
2016) towards the end of financial year 2015. The goal of September 2008 (in a final report) the High-Level
Priority Sector Lending Certificates is to create market- Committee on Financial Sector Reforms recommended the
introduction of Priority Sector Lending Certificates. On 7 April
About the author 2016 the portal for trading Priority Sector Lending
Certificates was launched by the Reserve Bank of India.
Arun Kumar Gupta
Within twelve months of the launch of the Priority Sector
Faculty - Credit
Lending Certificates portal for trading, a total of INR 430.1
Chief Manager and Centre Incharge
billion (US$6.63 billion as of 31 March 2017) of PSLC SF/MF
Staff Training Centre - Mangaluru
Union Bank of India and PSLC General by volume was traded.
42 | 2023 | APRIL | BANKING FINANCE