“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.
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.
Indian Overseas Bank (IOB) reported that its PSLC commission income for Q1FY27 surged by 1,697.92 per cent sequentially to ₹863 crore, up from ₹48 crore in Q4FY26. On a year-on-year (Y-o-Y) basis, the commission income grew by 333.67 per cent from ₹199 crore in the same period last year.
The surge lifted the bank’s non-interest income to ₹2,160 crore in Q1, up 67.31 per cent quarter-on-quarter from ₹1,291 crore and 45.85 per cent Y-o-Y from ₹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, meanwhile, sold PSLCs worth ₹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.