Mumbai, Apr 12 (KNN) S S Mundra, Deputy Governor, Reserve Bank has recently launched a platform to enable trading in Priority Sector Lending Certificates (PSLCs) by Banks.

Designed in the lines of carbon credit trading, the trading platform will allow market mechanism to drive priority sector lending by leveraging the comparative strength of different banks.

For instance, a bank with an expertise in lending to small industry can over perform there and get benefit by selling its over performance to another bank that is lagging in achieving the targets.

This way all banks will be able to achieve their targets under the priority sector lending and high achieving Banks will not be restricted by their quotas in lending to priority sectors.

As per RBI instructions, 40 percent of   Net Bank Credit of a Bank is to be provided to the priority sector which includes MSMEs, Agriculture, weaker section etc.  Credit to renewable energy projects and export credits are also included in priority sector lending.

The priority sector credit to the MSMEs has been pegged at 7.5% of the total Bank credit with interest ceiling at Bank rate plus 8% per annum. However, many Banks could not meet the target. Now they can meet their targets by buying the ‘loans’ at the portal.

Reserve Bank also launched a platform to enable trading in the certificates through its Core Banking Solution (CBS) portal (e-Kuber). All Scheduled Commercial Banks are eligible to participate in the trading.

Four kinds of PSLCs, namely, PSLC - Agriculture, PSLC – Small & Marginal

Farmers, PSLC – Micro Enterprises and PSLC - General can be bought and sold via

platform. The certificates will have a standard lot size of Rs 25 lakh and multiples thereof.

Commenting on the development, an expert on MSME finance opined that this will be a good initiative and open an avenue for banks, particularly the foreign Banks, who have limited Branches, mainly in Cities, to achieve their priority sector credit targets by buying them over the portal.

He also said that a logical extension of the initiative should be trading of MSME receivables particularly from the public sector undertakings for which RBI is operating a similar e-trading platform TreDs. (KNN/ DB)