Part of effort to increase the share of retail advances, says general manager
As part of its effort to increase the share of retail advances in its loan book, Hyderabad-based Andhra Bank is planning to almost double its portfolio of loans given against gold as security to Rs 1,500 crore, by scaling up activity in North India and the Mumbai zone.
While the bank has a significant portfolio of agricultural loans extended against gold as collateral, there is huge scope to use our over 1,400-branches’ network to tap the non-farm segment for gold loans, said its chairman and managing director RS Reddy.
This type of loan is very popular in Tamil Nadu and Andhra Pradesh but not in other parts of the country, especially not in North India.
“We have just started issuing loans against gold and plan to disburse Rs 100 crore of such loans in the current financial year in the Mumbai zone,” said M Anjaneya Prasad, general manager.
The bank’s Mumbai zone includes Maharashtra, Goa and Gujarat.
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Officials said the interest income from farm loans against gold was modest, since rates are governed by regulations. The income from non-farm retail gold loans will be better, due to higher rates. They also carry little risk of turning into Non-Performing Assets (NPAs).
Customers will be able to put up ornamental gold as collateral and avail of loans for a maximum duration of two years, at the end of which these may be rolled over. There will be no charges for prepayment of loans and there is no upper limit to the value of the loan.
“These types of loans are beneficial to customers, who can unlock the value of the gold. And to us, too, because gold always appreciates in value,” said Prasad.
The banks’ advances against gold currently stand at Rs 900 crore, which is 12 per cent of its total retail loan book of Rs 7,800 crore. The bank wants to focus on its retail loan book and aims to grow retail advances by 35 per cent in the current financial year.
The public sector lender is also offering home loans at a fixed interest of 8 per cent and has sanctioned Rs 60 crore worth of fresh loans since the launch of the scheme. It is planning a scheme next month to waive processing fees for customers who avail of home loans of Rs 20 lakh and above.