Saraswat Co-operative Bank to mop up more PSLCs to meet revised target

Saraswat Co-operative Bank may step up purchase of priority sector lending certificates (PSLC) in FY2021 to meet the revised priority sector lending (PSL) target prescribed by the Reserve Bank of India for urban co-operative banks (UCBs).

In March 2020, the central bank directed UCBs to achieve PSL target of 75 per cent of their total advances in four stages by March-end 2024, against the earlier target of 40 per cent.

The milestones for achieving PSL target are — 45 per cent by March 2021, 50 per cent by March 2022, 60 per cent by March 2023 and 75 per cent by March 2024.

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PSL portfolio of India’s largest UCB, which had total business (deposits plus advances) of ₹63,422 crore as at March-end 2020, had declined to 42.30 per cent in FY20 (45.21 per cent FY19), as per the bank’s latest annual report.

The multi-state UCB, however, surpassed the PSL target of 40 per cent of the total advances portfolio in FY20.

PSLCs enable banks to achieve PSL target and sub-targets through purchase of these instruments in the event of shortfall and at the same time incentivise the surplus banks, thereby enhancing lending to the categories under priority sector.

Saraswat Bank purchased PSLCs aggregating ₹2,300 crore in FY2020 (₹2,360 crore in FY2019).

PSL includes loans given by banks to sectors such as agriculture, micro, small and medium enterprises, export credit, education, housing, social infrastructure, and renewable energy.

In its report, the bank said it has formed a Special Group for monitoring its priority sector goals/ achievements.

Gautam E Thakur, Chairman, Saraswat Co-operative Bank, said, “With rural and semi-urban regions showing promising growth and considering our good experience in microfinance lending, the bank aims to further expand the reach of our microfinance schemes to all the districts where we are presently operating.”

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The bank will also be focussing on low-ticket commercial loans so as to spur small manufacturers.

“This will have twin advantages: on one hand, we will have higher priority sector advances in our portfolio and on the other, risk will also be spread over a huge number of such small borrowers, thus containing non-performing assets.

“Besides, such loans will also help improve the overall yield,” Thakur said.