PSLC FULL FORM

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In this article you get to know about PSLC full from, PSLC category and other details related to PSLC.

This article is written after reading RBI Circular, Wikipedia and more than 10 articles related to PSLC.

PSLC FULL FORM IN BANKING:

PSLC is a Banking Term. PSLC full form in banking refers to Priority Sector Lending Certificate. It means banks can buy and sell these certificates to reach their Priority Sector lending targets. PSLC first recommended by Raghuram Rajan Committee in the year 2009. PSLC trading is done in RBI E Kuber portal. PSLCs introduced in the year April 2015 and trading started on 07.04.2016 in E Kuber portal.

There are four types of PSLC Certificates can be issued by banks.

Types of PSLC Certificates:

PSLC Agriculture

It includes all the types of agriculture loans expect SF/MF loans. Its is counting for achievement of agriculture target and overall PSL target.

PSLC General

It includes loans other than agriculture and micro enterprises. Its counting for achievement of overall PSL target.

PSLC Micro Enterprises

It includes all PSL loans to Micro Enterprises. Its counting achievement of micro enterprises sub target and overall PSL target.

PSLC SF/MF

It includes all eligible loans to small and marginal farmers. Its counting achievement of SF/MF sub target, agriculture target and overall PSL target.

PSLC IMPORTANCE:

Banks can achieve priority sector lending targets by buying or selling PSLC certificates. It is very useful for Private and Foreign Banks to achieve their targets because they having less lending in priority sector advances. If banks fail to achieve targets they need to invest amount in Rural Infrastructure Development Fund. 

PSLC certificates get expired on 31^st March, at the end of financial year. These certificate does not transfer any credit risk to buyer because there is no transfer of tangible asset or cash flow.

PSLC having a lot size of ₹ 25 Lakhs and multiples thereof. The amount paid by banks to purchase PSLC treated as Expense and amount received form purchase of PSLC treated as Miscellaneous Income. GST is applicable to income earned by banks from PSL Certificates.   

PSLC prices is determined on the basis of demand and supply as reflected in RBI E Kuber trading portal.

PSLC Example:

X and Y named two banks having total loans of  ₹100 and ₹ 50 crore.

X Bank having a total loans of ₹ 100 crore out of which ₹ 50 crore loans are priority sector loans. As per PSLC requirement bank can have only 40% target. X Bank having 10 crore of excess loans.

Now Y Bank having total loans of ₹ 50 crore out of which only having ₹ 10 crore priority sector advance. Its only 20% of total loan. To reach priority sector advance target bank need to purchase ₹ 10 crore wroth PSL Certificate from X Bank. But to do this transaction can not be done directly for this they need to use RBI E Kuber portal.

CONCLUSION:

Dear reader in this article you get to know about PSLC full from,

PSLC types, PSLC lot size, PSLC expiry, PSLC importance. If you have any query regarding this article kindly comment below.