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(RBI) FAQs on Priority Sector Lending Certificates (PSLC)
1. What is the expiry date of PSLC?
All PSLCs will be valid till March 31st and will expire on April 1st.
2. Whether PSLCs can be issued for a limited period i.e for one reporting quarter and multiples thereof?
The duration of the PSLCs will depend on the date of issue with all PSLCs being valid till March 31st and expiring on April 1st.
3. Whether service tax/ stamp duty/ transaction tax will be applicable while paying fee for PSLC?
PSLCs may be construed in the nature of 'goods', dealing in which has been notified as a permissible activity under section 6(1)(o) of BR Act vide Government of India Notification dated May 4, 2016. The tax implications on account of trading in PSLCs may be determined by the banks in accordance with the applicable tax laws. Further, as per the extant guidelines, no transaction charge/ fees is applicable on the participating banks payable to RBI for usage of the PSLC module on e-Kuber portal.
4. Whether PSLC – Weaker Sections or PSLC – Export Credit can be traded?
There are only four eligible categories of PSLCs i.e. PSLC General, PSLC Small and Marginal Farmer, PSLC Agriculture & PSLC Micro Enterprises.
5. Whether Export Credit may form a part of PSLC 'General' and whether banks’ surplus in Export Credit can be sold as PSLC 'General’? Can foreign banks with less than 20 branches reckon PSLC General towards the incremental target for lending to sectors other than exports beyond the overall target of 32 per cent?
'Export Credit' can form a part of underlying assets against the PSLC - General. However, any bank issuing PSLC-General against 'Export Credit' shall ensure that the underlying 'Export Credit' portfolio is also eligible for priority sector classification by domestic banks.
Foreign banks with less than 20 branches are not allowed to reckon PSLC General towards fulfilment of their incremental target for lending to sectors other than exports beyond the overall target of 32 per cent. However, such banks are allowed to reckon PSLC Agriculture, PSLC Micro Enterprises and PSLC SF / MF for the same.
6. Where can the banks look for market information like prevailing prices, lot size, and historical transactions done by other market participants? Will this information be available in E-Kuber?
The trade summary of PSLC market is available to the participants through the e-Kuber portal. Any new functionality will be notified to the participants via 'News & Announcements' section under e-Kuber portal.
7. Is secondary market allowed for PSLCs i.e., Sale of surplus at a later point in time post purchase in anticipation of deficit at a prior point of time. Can the purchasing bank re-sell the PSLCs? Will only the net PSLC position be reckoned for ascertaining the underlying asset?
A bank can purchase and issue PSLCs as per its requirements. The net position of PSLCs sold and purchased has to be included while reporting the quarterly and annual priority sector returns. However, with regard to ascertaining the underlying assets, as on March 31st, the bank must have met the priority sector target by way of the sum of outstanding priority sector portfolio and net of PSLCs issued and purchased.
8. What happens if the RBI inspection team, at a later date, de-classifies a particular PSLC (which has been already traded by the bank as PSLC) ineligible?
The misclassifications, if any, will have to be reduced from the achievement of PSLC seller bank only. There will be no counterparty risk for the PSLC buyer, even if, the underlying asset of the traded PSLC gets misclassified.
9. While there is no transfer of assets, will there be any impact on the ANBC calculation?
The banks may refer to guidelines related to computation of ANBC for priority sector reporting as advised vide Master Circular on PSL dated July 1, 2015.
10. The buyer would pay a fee to the seller of the PSLC which will be market determined. Is there any standard/ minimum fee prescribed by the RBI, for purchase of any PSLC?
The premium will be completely market determined. No floor/ ceiling has been prescribed by RBI in this regard.
11. How the charges/commission shall be paid through E-Kuber portal or separate RTGS is required to be made?
There will be real time settlement of the matched premium and respective current accounts of the participating banks with RBI will be debited/ credited to the extent of matched premium accordingly.
12. Will there be automatic matching of trades or can the buyer/seller select the counterparty? Will partial matching also happen?
The order matching will be done on anonymous basis through the portal and the buyer/ seller cannot select the counterparty. Partial matching will happen depending on the matching of premium and availability of category wise PSLC lots for sale and purchase.
(This page was last updated as on November 22, 2016)
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