Public-sector banks in India are witnessing a significant boost in their non-interest income for Q1FY27, largely propelled by the strategic sale of Priority Sector Lending Certificates underpinned by their burgeoning gold loan portfolios.
Illustration: Dominic Xavier/Rediff
Key Points
- Public-sector banks (PSBs) are generating healthy income by selling Priority Sector Lending Certificates (PSLCs) backed by their fast-growing gold loan portfolios.
- Several PSBs reported a sharp jump in non-interest income for Q1FY27, with gold loans identified as the most profitable segment.
- Indian Overseas Bank (IOB) saw its PSLC commission income surge by 1,697.92 per cent sequentially to Rs 863 crore in Q1FY27.
- Central Bank of India earned Rs 250 crore from PSLC sales after its priority sector advances rose to 58 per cent of adjusted net bank credit (ANBC).
- The rapid expansion of gold loan books is a key driver, enabling banks to exceed priority sector lending targets and generate surplus PSLCs for sale.
Public-sector banks (PSBs) booked healthy income by selling priority sector lending certificates (PSLCs) backed by their fast-growing gold loan portfolios, with several lenders reporting a sharp jump in non-interest income for the April-June quarter of 2026-27 (Q1FY27).
“Gold is the most profitable loan segment right now, with PSU banks making money on PSLC sales.
“A few PSU banks active in the gold loan business are expected to book significant profits,” a senior banker at a state-owned bank said.
Understanding PSLCs and Priority Sector Lending
PSLCs are tradable instruments that allow banks to buy and sell priority sector lending obligations without transferring the underlying loan assets.
Banks that exceed their priority sector lending targets can sell surplus certificates to lenders that fall short, earning fee income in the process.
Under Reserve Bank of India norms, commercial banks, small finance banks, regional rural banks and cooperative banks are required to lend at least 40 per cent of their adjusted net bank credit (ANBC) to priority sectors.
Bank Performance Highlights
Indian Overseas Bank (IOB) reported that its PSLC commission income for Q1FY27 surged by 1,697.92 per cent sequentially to Rs 863 crore, up from Rs 48 crore in Q4FY26. On a year-on-year (Y-o-Y) basis, the commission income grew by 333.67 per cent from Rs 199 crore in the same period last year.
The surge lifted the bank’s non-interest income to Rs 2,160 crore in Q1, up 67.31 per cent quarter-on-quarter from Rs 1,291 crore and 45.85 per cent Y-o-Y from Rs 1,481 crore.
“Non-interest income has shown a growth of 45.85 per cent, primarily driven by PSLC sale and recovery from technically written-off accounts, in addition to normal non-interest income,” said Ajay Kumar Srivastava, managing director and chief executive officer, Indian Overseas Bank, during the bank’s post-earnings media call.
Central Bank of India’s Contribution
Central Bank of India, meanwhile, sold PSLCs worth Rs 2,000 crore during the quarter after its total priority sector advances rose to 58 per cent of ANBC, well above the regulatory requirement of 40 per cent.
Lending to weaker sections stood at 17.35 per cent of ANBC against the mandated 12 per cent, while agriculture advances were at 22.41 per cent against the required 18 per cent.
Rajneesh Karnatak, managing director and chief executive officer of Central Bank of India, said during the bank’s post-earnings media call that the bank earned Rs 250 crore from PSLC sales in Q1FY27.
Bankers said the surge in PSLC income was driven largely by the rapid expansion in gold loan books, which helped lenders exceed their priority sector lending targets and generate surplus certificates for sale.
“We booked significant profit through PSLC sales this quarter.
“The gold business is very profitable right now,” another senior banker at a state-owned bank said.