Canara Bank has given more loans to priority sectors (like farming, small businesses, etc.) than required under the Priority Sector Lending (PSL) rules in the current quarter (July to September 2025). These loans usually earn lower interest, which puts pressure on the bank’s profits (called margin stress). The bank plans to sell some of these extra loans in Q2 FY26 using something called Priority Sector Lending Certificates (PSLCs).
This move is meant to ease pressure on the bank’s profit margins, which are getting affected because the Reserve Bank of India (RBI) has cut interest rates by 1% (100 basis points) this year and more cuts may follow as inflation is now below 3%.
Banks in India are required to lend at least 40% of loans to priority sectors. But Canara Bank has gone beyond this and currently has 45.63% of its loans which is above the limit. Since there is demand for these types of loans from other banks, Canara Bank is planning to sell some of them as “PSL Certificates” to make money. They already earned ₹1,248 crore by selling such loans in the April-June 2025 quarter.
Canara Bank Other Future Plans
To balance its financial performance and deal with reduced earnings from interest on loans, Canara Bank plans to list in two of its subsidiaries in the stock market. They are
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Canara Robeco AMC (Mutual Fund) – The bank plans to sell 13% stake through an IPO (Initial Public Offering).
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Canara HSBC Life Insurance Company – The bank has approved the sale of 14.5% stake.
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Despite selling parts of these companies, Canara Bank will still own most of both companies and continue to make good money by selling their financial products.
The bank’s CEO and MD Mr. K. Satyanarayana Raju, said that profits from interest (called Net Interest Margin) are under pressure this year. K Satyanarayana Raju, MD & CEO of Canara Bank is concerned that the bank may not meet its earlier profit margin target of 2.75% due to the RBI interest rates cut. He expects some pressure in the current quarter, but hopes for improvement in the second half of the year (Oct 2025–Mar 2026).