Priority Sector Lending Certificates;

Priority Sector Lending Certificates;

The Raghuram Rajan Committee on Financial Sector Reforms had, inter alia, recommended introduction of “Priority Sector Lending Certificates (PSLCs)” to implement the priority sector lending in the country. The revised Priority Sector Guidelines provided for Introduction of Priority Sector Lending Certificates (PSLCs) as a mechanism to incentivise banks having surplus in their lending to different categories of priority sector. 

On lines of carbon credit trading, the goal of PSLCs is to allow market mechanism to drive priority sector lending by leveraging the comparative strength of different banks.  A bank with an expertise in lending to small farmers can over perform there and get benefit by selling its over performance through PSLCs. Another bank that is better at lending to small industry can buy these certificates while selling PSLCs for micro enterprise loans.

 

 

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