Private Banks Outperform Public Sector In Priority Sector Lending: RBI Report
Date
12/30/2024 2:39:31 PM
(MENAFN- KNN India)
New Delhi, Dec 30 (KNN) Private sector banks have reached a significant milestone in FY 2023-24, meeting priority sector lending targets and sub-targets for major categories, including agriculture, for the first time, according to data from the Reserve bank of India.
The performance of private banks notably surpassed their public sector counterparts, although all bank groups successfully met their mandated overall targets and sub-targets.
The regulatory framework requires public sector, private, and foreign banks to allocate 40 percent of their adjusted net bank credit or credit equivalent of off-balance sheet exposure, whichever is higher, to priority sector lending.
Small finance banks face a more stringent requirement of 75 percent. Private banks' achievement of these targets has been facilitated by their ability to invest in priority sector lending certificates (PSLCs), which serve as instruments to address potential shortfalls in meeting lending obligations.
The PSLC market demonstrated robust growth in FY24, with trading volumes increasing by 26 percent, primarily driven by PSLC-General category transactions.
The RBI's report on Trends and Progress of Banking highlighted that among the four PSLC categories, the small and marginal farmers segment recorded the highest trading volume.
This trend reflects both the specialisation of certain banks in lending to this borrower category and the challenges faced by other institutions in meeting sub-targets through direct lending.
Private sector banks have emerged as dominant players in the PSLC market over the past five years. In FY24, they accounted for nearly half (49 percent) of total PSLC sales, significantly outpacing public sector banks, which represented 21 percent of sales, according to the RBI report.
This shift indicates a growing sophistication in private banks' approach to meeting priority sector requirements through market mechanisms.
(KNN Bureau)
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