Executive Summary:
This document from the Reserve Bank of India (RBI) introduces instructions on trading in Priority Sector Lending Certificates (PSLCs) to help banks meet priority sector lending targets. These certificates are traded through the CBS portal eKuber. All PSLCs expire by March 31st of each year, irrespective of the date they were first sold.
Key Points / Main Content:
* **Purpose:**
* Enable banks to meet priority sector lending targets and sub-targets by purchasing PSLCs.
* Incentivize banks with surplus lending in priority sectors.
* Enhance overall lending to priority sector categories.
* **Nature of PSLCs:**
* The seller is selling fulfillment of priority sector obligation, and the buyer is purchasing the same.
* No transfer of risks or loan assets occurs.
* **Trading Modalities:**
* PSLCs are traded through the RBI's eKuber portal.
* Detailed operational instructions are available on the eKuber portal.
* **Eligible Participants (Sellers/Buyers):**
* Scheduled Commercial Banks (SCBs).
* Regional Rural Banks (RRBs).
* Local Area Banks (LABs).
* Small Finance Banks (when operational).
* Urban Cooperative Banks.
* **Types of PSLCs:**
* PSLC Agriculture: Counts towards the total agriculture lending target.
* PSLC SFMF: Counts towards the sub-target for lending to Small and Marginal Farmers.
* PSLC Micro Enterprises: Counts towards the sub-target for lending to Micro Enterprises.
* PSLC General: Counts towards the overall priority sector target.
* **PSL Achievement Computation:**
* PSL achievement is calculated as the sum of outstanding priority sector loans and the net nominal value of PSLCs issued and purchased.
* **Amount Eligible for Issue**
* Banks can issue PSLCs up to 50% of the previous year's PSL achievement without underlying assets.
* Banks must meet the priority sector target through outstanding PSL portfolio and net PSLCs.
* **Credit Risk:**
* No transfer of credit risk.
* **Expiry Date:**
* All PSLCs expire on March 31st and are not valid beyond this date.
* **Settlement:**
* Funds settlement is done through the eKuber platform.
* **Value and Fee:**
* The nominal value represents the equivalent PSL amount transferred.
* The buyer pays a market-determined fee to the seller.
* **Lot Size:**
* Standard lot size of ₹25 lakh and multiples thereof.
* **Accounting:**
* Fees paid for purchase are treated as expenses.
* Fees received for sales are treated as miscellaneous income.
* **Disclosures:**
* Both sellers and buyers must report the amount of PSLCs sold and purchased in their balance sheet disclosures.
Impact Analysis:
* **Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), Local Area Banks (LABs), Small Finance Banks, Urban Cooperative Banks:**
* *Impact:* These banks can now use PSLCs to manage their priority sector lending targets, either by buying certificates to cover shortfalls or selling certificates if they have exceeded their targets.
* *Action Required:* These banks need to familiarize themselves with the eKuber platform, understand the different types of PSLCs, and incorporate PSLC trading into their priority sector lending strategies and reporting processes.
Key Entities Referenced
Regional Rural Banks: Banks eligible to participate in the PSLC scheme as sellers and buyers.
Reserve Bank of India: The central bank of India, which issued the circular regarding Priority Sector Lending Certificates (PSLCs).
Priority Sector Lending Certificates: Instruments introduced to enable banks to achieve priority sector lending targets and sub-targets.
Banking Regulation Act, 1949: An act that specifies Dealing in Priority Sector Lending Certificates PSLCs as a form of business under Section 6 1o.
eKuber: The CBS portal of RBI used as a trading platform for PSLCs.
Scheduled Commercial Banks: Banks eligible to participate in the PSLC scheme as sellers and buyers.
Urban Cooperative Banks: Banks eligible to participate in the PSLC scheme as sellers and buyers.
Small and Marginal Farmers: A subtarget category under priority sector lending for which PSLCs are issued (PSLC SFMF).
भारतीय ररज़र् व बकैं
----------------------RESERVE BANK OF INDIA-----------------
www.rbi.org.in
RBI/2015-16/366
FIDD.CO.Plan.BC.23/ 04.09.01/2015-16 April 7, 2016
The Chairman/ Managing Director/
Chief Executive Officer
[All Scheduled Commercial Banks
(including Regional Rural Banks)/ Urban Co-operative Banks/ Local Area Banks]
Dear Sir/ Madam,
Priority Sector Lending Certificates
Please refer to Para VIII of Circular FIDD.CO.Plan.BC 54/04.09.01/2014 – 15 dated
April 23, 2015 on Priority Sector Lending - Targets and Classifications about
introduction of Priority Sector Lending certificates.
2. Government of India vide Notification dated February 04, 2016 has specified
“Dealing in Priority Sector Lending Certificates (PSLCs) in accordance with the
Guidelines issued by Reserve Bank of India” as a form of business under Section 6
(1)(o) of the Banking Regulation Act, 1949. Accordingly, instructions on trading in
PSLCs are enclosed in the Annex. To facilitate trading in PSLCs, a trading platform
is being provided through the CBS portal (e-Kuber). The detailed user manual/
instructions for trading on the platform are available through the portal.
Yours faithfully,
(A. Udgata)
Principal Chief General Manager
Encl: As above
वित्तीय सावेिन औ वविसेाविगे ,सनन्द्रीय ससेय सेालय स,10 िीवंजिल,सेंरीय ससेय सेालय सगिऔ, हीदग तसाहं वे ा,पोस्टबॉक्ाां. 10014,व ंबई -400001
Financial Inclusion & Development Dept.,Central Office,10th Floor, Central Office Building,Shahid Bhagat Singh Marg,P.B.No.10014,Mumbai-1
टनली Tel:022-22601000 फैक्ाः91-22-22621011/22610943/22610948 ई-वनल: cgmincfidd@rbi.org.in
ह दिं ी आसान ै,इसका प्रयोग बढ़ाइए।
“चेतार्नी : ाेा ररज़र्व बकैं रर्ारा-डाक, एसएाएस या फोन कॉा के जररए ककसी की भी व् यक्तितगत जानकारी जैसे बकैं के ााते का ् यौरा, पासर्डव आहद न ीिं ाािंगी जाती
ै। य धन राने या देने का प्रस् तार् भी न ीिं करता ै। ेसे प्रस् तार्क का ककसी भी तरीके से जर्ाब ात दीक्तजए।"
Caution: RBI never sends mails, SMSs or makes calls asking for personal information like bank account details, passwords, etc. It never
keeps or offers funds to anyone. Please do not respond in any manner to such offers.Annex
Priority Sector Lending Certificates - Scheme
i) Purpose: To enable banks to achieve the priority sector lending target and sub-
targets by purchase of these instruments in the event of shortfall and at the same
time incentivize the surplus banks; thereby enhancing lending to the categories
under priority sector.
ii) Nature of the Instruments: The seller will be selling fulfillment of priority sector
obligation and the buyer would be buying the same. There will be no transfer of risks
or loan assets.
iii) Modalities: The PSLCs will be traded through the CBS portal (e-Kuber) of RBI.
The detailed operational instructions for carrying out the trades are available through
the e-Kuber portal.
iv) Sellers/Buyers: Scheduled Commercial Banks (SCBs), Regional Rural Banks
(RRBs), Local Area Banks (LABs), Small Finance Banks (when they become
operational) and Urban Co-operative Banks who have originated PSL eligible
category loans subject to such regulations as may be issued by the Bank.
v) Types of PSLCs: There would be four kinds of PSLCs :–
i) PSLC Agriculture: Counting for achievement towards the total agriculture lending
target.
ii) PSLC SF/MF: Counting for achievement towards the sub-target for lending to
Small and Marginal Farmers.
iii) PSLC Micro Enterprises: Counting for achievement towards the sub target for
lending to Micro Enterprises.
iv) PSLC General: Counting for achievement towards the overall priority sector
target.As stated in the Master Circular FIDD.CO.Plan.BC.4/04.09.01/2015-16 on Priority
Sector Lending - Targets and Classifications dated July 01, 2015, Priority Sector
comprises several categories, including Agriculture and Micro Enterprises. In
addition to the overall target and sectoral targets for lending to agriculture and micro
enterprises, banks are required to achieve specified sub-target for lending to Small
and Marginal Farmers. Accordingly, to avoid computational issues in assessing the
achievement/shortfall of PSL targets, it is advised that the above four types of
certificates will represent specific loans and count for specific sub-targets/targets as
indicated hereunder:
S.No. Type of PSLCs Representing Counting for
1. PSLC - All eligible Agriculture loans Achievement of
Agriculture except loans to SF/MF for agriculture target and
which separate certificates overall PSL target
are available
2. PSLC - SF/MF All eligible loans to Achievement of SF/MF
small/marginal farmers sub-target, agriculture
target and overall PSL
target
3. PSLC - Micro All PSL Loans to Micro Achievement of micro-
Enterprises Enterprises enterprise sub-target and
overall PSL target
4. PSLC - General The residual priority sector Achievement of overall
loans i.e. other than loans to PSL target
agriculture and micro
enterprises for which
separate certificates are
available
Thus, a bank having shortfall in achievement of any sub-target (e.g. SF/MF, Micro),
will have to buy the specific PSLC to achieve the target. However, if a bank is having
shortfall in achievement of the overall target only, as applicable to it, may buy any of
the available PSLCs.
vi) Computation of PSL achievement: A bank’s PSL achievement would be
computed as the sum of outstanding priority sector loans, and the net nominal value
of the PSLCs issued and purchased. Such computation will be done separately
where sub targets are prescribed as on the reporting date.vii) Amount eligible for issue: Normally PSLCs will be issued against the
underlying assets. However, with the objective of developing a strong and vibrant
market for PSLCs, a bank is permitted to issue PSLCs upto 50 percent of previous
year’s PSL achievement without having the underlying in its books. However, as on
the reporting date, the bank must have met the priority sector target by way of the
sum of outstanding priority sector lending portfolio and net of PSLCs issued and
purchased. To the extent of shortfall in the achievement of target, banks may be
required to invest in RIDF/other funds as hitherto.
viii) Credit Risk: There will be no transfer of credit risk on the underlying as there is
no transfer of tangible assets or cash flow.
ix) Expiry date: All PSLCs will expire by March 31st and will not be valid beyond the
reporting date (March 31st), irrespective of the date it was first sold.
x) Settlement: The settlement of funds will be done through the platform as
explained in the e-Kuber portal.
xi) Value and Fee: The nominal value of PSLC would represent the equivalent of
the PSL that would get deducted from the PSL portfolio of the seller and added to
the PSL portfolio of the buyer. The buyer would pay a fee to the seller which will be
market determined.
xii) Lot Size: The PSLCs would have a standard lot size of ` 25 lakh and multiples
thereof.
xiii) Accounting: The fee paid for purchase of the PSLC would be treated as an
‘Expense’ and the fee received for the sale of PSLCs would be treated as
‘Miscellaneous Income’.
xiv) Disclosures: Both seller and buyer shall report the amount of PSLCs
(category-wise) sold and purchased during the year in the ‘Disclosures to the
Balance Sheet’.Illustration:
1. Bank A may sell PSLCs with a nominal value of ` 100 crores to Bank B on
July 15, 2016. Bank B will reckon ` 100 crore towards its priority sector
achievement as on the reporting dates of September 30, 2016, December 31,
2016 & March 31, 2017, while Bank A will subtract the same from its
achievement figures for the respective reporting dates. The PSLC will expire
by March 31, 2017.
2. Bank C may buy ` 100 crore PSLC on March 30, 2017 from Bank D. Bank D
will subtract ` 100 crore from its PSL reporting on March 31, 2017 while Bank
C will reckon the same towards its achievement. The PSLC will expire by
March 31, 2017.
*****