Credit push to priority sector gains traction: RBI report

The Reserve Bank of India’s push for priority sector lending is gaining traction, as seen from the rising volumes of PSL certificate trades which stood at more than `6 lakh crore last fiscal.

This opens up new avenues of credit for rural households and micro, small and medium enterprises (MSMEs) through NBFCs and housing finance companies.

As per RBI data, the total trading volume of priority sector lending certificates (PSLCs) registered a growth of 12.4% and stood at Rs 6.62 lakh crore at the end FY22. Amongst the four PSLC categories, the highest trading was observed in PSLC-General and PSLC Small and Marginal Farmers.


Besides, the weighted average premiums increased across the board for all categories of PSLCs, with the certificates for small and marginal farmers commanding the highest premium.

During FY22, outstanding priority sector advances grew at 12.3%, data from the central bank showed.

“All bank groups managed to meet their overall priority sector lending targets, while foreign banks and small finance banks also achieved all sectoral targets,” the RBI said.

State-run banks fell short of achieving their targets only in the microenterprises category. Private banks, on the other hand, fulfilled their targets only for micro-enterprises, the central bank noted.

Although the share of priority sector loans in total loans increased marginally from 35.3% in FY21 to 35.8% in FY22, their share in total gross non-performing loans increased from 40.4% to 43.1%, led by defaults in the agricultural sector.

While small finance banks extended 76% of their loans to the priority sector, close to 88% of their non-performing loans originated from this portfolio. On the other hand, a disproportionately lower share of NPAs resulted from the priority sector for private banks, the regulator noted.