The full form of PSLC is Priority Sector Lending Certificates

Priority sector lending certificates (PSLCs) are certificates that are issued against priority sector loans for banks. They allow banks to meet their targets and sub-targets – when it comes to priority sector lending – by buying the instruments. The banks use PSLCs to guard against shortfalls. The lending certificates also incentivize – through surplus – to lend more to priority sectors.

PSLCs are used mainly in India and elsewhere in Asia. PSLCs are essentially social credits that promote comparative advantages while banks in India fulfill their PSL duties. The goal of PSLCs is to facilitate market efficiency, creating jobs in priority sectors. It both improves the overall competitiveness of the economy and ensures that market infrastructure will be strong.

Summary: 

• Priority sector lending certificates (PSLCs) are financial instruments that can be borrowed against by banks in India, allowing them to make their target and sub-target goals in terms of loans being offered.
• Public sector lending (PSL) is mandated by the Reserve Bank of India (RBI), making it a requirement for domestic and foreign banks to offer loans to specific sectors and sub-sectors within the nation’s economy.
• PSLCs are important because they help banks protect against shortfall as they lend to minority populations and sectors that typically perform weaker.