Public sector banks (PSBs) recorded strong earnings in the April–June quarter of FY27 (Q1 FY27), significantly aided by the sale of Priority Sector Lending Certificates (PSLCs) backed by a rapidly growing gold loan segment. The move led to a sharp increase in non-interest income across several state-owned lenders.
Under Reserve Bank of India (RBI) norms, commercial banks, small finance banks, regional rural banks, and cooperative banks must direct at least 40 percent of their Adjusted Net Bank Credit (ANBC) to designated priority sectors. Through the PSLC mechanism, institutions that surpass their mandatory targets can trade their surplus certificates to lenders falling short, earning fee income without transferring the underlying loan assets.
A senior official at a public sector bank noted that gold loans are currently among the most profitable lending segments, allowing active state-owned banks to register notable growth in fee-based income via PSLC transactions.
Indian Overseas Bank (IOB) reported that its earnings from PSLC commissions surged to Rs 863 crore in Q1 FY27-a 1,697.92 percent jump over the previous quarter’s Rs 48 crore (Q4 FY26), and a 333.67 percent increase year-on-year compared to Rs 199 crore in the same period last year. This surge helped push the bank’s total non-interest income for the quarter to Rs 2,160 crore, reflecting a 67.31 percent sequential increase from Rs 1,291 crore in Q4 FY26 and a 45.85 percent YoY growth from Rs 1,481 crore in Q1 FY26.
Ajay Kumar Srivastava, Managing Director and CEO of Indian Overseas Bank, stated after the result announcement that the 45.85 percent rise in non-interest income was primarily driven by PSLC sales, normal non-interest income, and recoveries from technically written-off accounts.
Similarly, Central Bank of India sold PSLCs worth Rs 2,000 crore during the quarter. The lender’s total priority sector lending stood at 58 percent of ANBC, comfortably above the 40 percent regulatory mandate. Its lending to weaker sections was recorded at 17.35 percent against the mandated 12 percent, while agriculture lending reached 22.41 percent against the required 18 percent.
Rajnish Karnataka, Managing Director and CEO of Central Bank of India, informed media representatives following the quarterly results that the bank earned Rs 250 crore from PSLC sales in Q1 FY27. Bankers attributed the spike in PSLC revenue directly to rapid expansion in gold loans, which enabled lenders to exceed priority targets and sell surplus certificates for profit.
