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iSPIRT & UGRO Capital unveil PSLAI, Priority Sector Lenders Association of India

By Gloria Mathias

January 20, 2025

  • Financial Technology
  • Fintech news
  • India FinTech news
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PSLAI, UGRO, iSPIRIT, Lending Solutions, Fintech news, Financial technology, India Fintech NewsThe Priority Sector Lenders Association of India (PSL Association, or PSLAI), formed as a Section 8 company, has been conceptualised to make loans under the Priority Sector Lending norms, an important business vertical for banks and NBFCs.

With a view to solve the problem of credit for Priority Sectors especially for MSMEs, under the aegis of iSPIRT, a new industry body named PSLAI has been formed. iSPIRT is bringing on board multiple lending institutions like UGRO Capital, IIFL, fintechs like GetVantage/GetGrowth Capital and many others as its founding members.

Currently, as per the RBI regulations, banks are required to maintain at least 40% of their adjusted Net Bank Credit (ANDC) as priority sector loans. This amounts to an annual disbursement of nearly INR 64 trillion to MSMEs. Since loans under PSL are relatively small amounts and are also considered riskier, the majority of the target is met by institutions through indirect means, such as securitisation deals.

The RBI defines PSL loans under 8 heads, which include agriculture, MSME and affordable housing. So far, credit to the agricultural sector has garnered the largest share of the pie under the PSL disbursements. The MSME sector, contributing nearly 29% of India’s GDP and 45.73% of exports, faces a significant credit gap of INR 103 trillion as of Fiscal 2024. Despite a growing demand for credit of INR 138 trillion, only 25% of the sector’s formal financing needs are currently met, leaving the majority of MSMEs reliant on informal credit sources.

iSPIRT believes that India’s digital growth, supported by the Indian DPI, has opened up new avenues for the SME/MSME sector. With the correct product developments and policy push, credit in this sector can double to nearly INR 130 trillion in the next few years and achieve 2x growth in the next 3-5 years.

PSLAI will be headed by Priyashmita Guha as the Chief Executive Officer and run with the help of an accomplished Board of Directors. Before joining PSLAI, Priyashmita was the COO of the Digital Lenders Association of India and was instrumental in driving the network growth of the association.

Shachindra Nath, Founder and Managing Director of UGRO Capital, said, “If you go and talk to a bank in India today, they will say MSME financing is not an issue. Every shopkeeper can get a Udyam certificate and become a priority sector borrower. The Bank’s 7.5% PSL requirement for MSME gets filled up. With a provision of being tagged or licensed as NBFC-PSL, technically, any lending from a bank to such an entity can come at a lower rate and be part of the Bank’s priority sector lending.”

Team PSLAI believes that promoting and developing credit products that use India’s DPI and support cashflow-based lending products will play an essential role in making PSL more mainstream. The Association thus plans to include, promote, and popularise digital networks like OCEN (Open Credit Enablement Network) and other DPI technology networks as vital product development tools. PSLAI will actively work with network partners and financial institutions to develop lending products built on all platforms.

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