This opens up new avenues of credit for rural households and micro, small and medium enterprises (MSMEs) through NBFCs and housing finance companies.
According to RBI data, the total trading volume of Priority Sector Loan Certificates (PSLC) recorded a growth of 12.4% and stood at Rs 6.62 lakh crore at the end of FY22. Among the four categories of PSLC, the highest trades were seen in PSLC-General and PSLC Small and Marginal Farmers.
In addition, weighted average premiums increased across the board for all PSLC categories, with certificates for smallholders and marginal farmers earning the highest premium.
In FY22, exceptional priority sector advances increased 12.3%, according to central bank data.
“All banking groups successfully met their overall lending targets in the priority sector, while foreign banks and smaller financial banks also met all sector targets,” the RBI said.
Public banks achieved their targets only in the microenterprise category. Private banks, on the other hand, only met their targets for micro-enterprises, the central bank noted. Although the share of priority sector loans in total loans increased slightly from 35.3% in FY21 to 35.8% in FY22, their share in total gross non-performing loans fell from 40.4% to 43.1%, mainly due to defaults in the agricultural sector.
While smaller financial banks provided 76% of their loans to the priority sector, almost 88% of their non-performing loans came from this portfolio. On the other hand, a disproportionately lower share of NPAs resulted from the priority sector for private banks, the regulator noted.