Consider the following statements regarding Priority Sector Lending Certificates PSLCs 1 These are t...........

Economic Affairs Types of Banks and Banking

Consider the following statements regarding Priority Sector Lending Certificates (PSLCs):

1. These are tradable certificates issued by the Reserve Bank of India for banks who have failed to meet their Priority Sector

Lending targets.

2. All Scheduled Commercial Banks, Small Finance Banks, and Payments Banks are eligible to participate in the trading of PSLC.

Which of the statements given above is/are correct?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

The Priority Sector Lending Certificates (PSCLs) are certificates issued by banks that have overreached their priority sector lending targets.
PSLCs thus can be issued only up to the extent of their over lending to the stipulated sectors. Buyers of PSLCs are usually those banks that could not meet their priority sector lending targets. The price of PSLCs will be determined based on demand and supply that will be reflected in the auction under the RBI’s eKuber trading platform.
• As per the RBI guidelines, banks can issue four types of PSLCs including three subsector PSLCs agriculture, small and marginal farmers, micro enterprises and one PSLC for general.
• All Scheduled Commercial Banks (including Regional Rural Banks), Urban Co-operative Banks, Small Finance Banks (when they become operational) and Local Area Banks are eligible to participate in the trading. However, Payment banks are not allowed to give any form of a loan or issue a credit card, which is also a form of unsecured personal loan. Consequently, they are not within the purview of buying or selling PSLCs. Hence statement 2 is not correct