Indian Banks Boost Non-Interest Income with Priority Sector Lending Certificates

Public sector banks in India are reporting a significant increase in non-interest income for Q1FY27, driven by the sale of Priority Sector Lending Certificates (PSLCs). This strategy involves selling surplus capacity to other lenders who fall short of mandatory lending targets. Indian Overseas Bank (IOB) has emerged as a major beneficiary, with its PSLC commission income reaching ₹863 crore for the quarter ending June 2026 - a sequential growth of nearly 1,698% compared to the previous quarter.

The ability to sell these certificates is linked to the rapid expansion of gold loan portfolios within these banks. By aggressively growing their gold loan books, state-owned lenders have been able to surpass the RBI's mandate, which requires banks to allocate 40% of their adjusted net bank credit to priority sectors.

Other institutions, such as Central Bank of India, have also utilized this mechanism to bolster their balance sheets. The bank reported generating ₹250 crore through PSLC sales during the same quarter and has a surplus capacity that allows it to generate non-interest revenue, providing a cushion to its overall profitability.