IMPACT STUDY

AGRI GOLD LOAN

By
N.D.S.V.Nageswara Rao
Chief Manager (Research)
STATE BANK INSTITUTE OF RURAL DEVELOPMENT
HYDERABAD
MAY 2009

ACKNOWLEDGEMENT
Agri Gold Loan is the traditional safest advance with very low rate of
NPAs.

After the simplification of the scheme, it is desired by the Top

Management to carry out an impact study.

I thank the Top Management for

allowing me to take up this study.

My heartfelt thanks are due to my Principal & CGM Shri M.Bhagavantha
Rao for his invaluable encouragement while conducting the study.
I am grateful to Shri Magdhum M. Shaik, DGM & Vice Principal for his
support and guidance.
I thank all the operating functionaries who had contributed in bringing out
this report.
My special thanks to Team SBIRD for their support.

N.D.S.V.Nageswara Rao
Chief Manager (Research)
Hyderabad,
18th May 2009

INDEX
Executive Summary

Introduction

Objectives

Methodology

Results & Discussions

Campaigns launched by different Circles

11

Views of operating functionaries

13

Availability of potential

17

Competitors moves

19

Conclusion

21

IMPACT STUDY AGRI GOLD LOAN

-

N.D.S.V.Nageswara Rao
Chief Manager (Research)

EXECUTIVE SUMMARY
Gold Loan was one of the agriculture loans, most popular in Hyderabad and
Chennai Circles.

To make it more popular and customer-friendly among all

Circles, Corporate Centre revisited the scheme and simplified the scheme in
June 2007. On a suggestion from Corporate Centre, the Institute conducted
impact study on how the simplified process helped in garnering more business.
Circle-wise performance indicated that Chennai Circle followed by Hyderabad
Circle topped the list with higher outstandings.

Kerala Circle came at third

position whereas Bangalore Circle came at a distant fourth position. All other
Circles could not improve the performance even after simplification of the
scheme.
Further analysis brought out the fact that the growth in Chennai Circle peaked
up after June06 (well before the introduction of the simplified scheme) and
continued at the same tempo upto Mar08. However, the downfall till Sep08 and
a marginal growth thereafter indicated a disturbing trend.

In respect of

Hyderabad Circle the growth curve had reached a plateau and had not peaked
up even after the simplification process.

Kerala Circle, which had a small

portfolio till June07 with a very small growth percentage, had peaked its
performance and there was no looking back after that. It was understood that the
campaigns launched by the Circle coupled with simplification of processes,
helped in this achievement.
The study also discussed about the campaigns launched by various Circles and
the views expressed by operating functionaries through SBIRDs Discussion
Forum on State Bank Times.
The study also had a look on the way various finance companies are poaching
the customers and the availability of vast potential for financing under Gold Loan
scheme.

IMPACT STUDY AGRI GOLD LOAN

INTRODUCTION
Gold Loan was one of the agriculture loans, most popular in Hyderabad and
Chennai Circles.

To make it more popular and customer-friendly among all

Circles, Corporate Centre revisited the scheme and simplified the scheme in
June 2007. SBIRD was also involved in this process and provided useful inputs
in the simplification of the scheme.
Later on, while approving the Annual Action Plan of the Institute for the year
2007-08, Corporate Centre suggested an impact study to be conducted on the
simplified Gold Loan scheme. It was understood that the objective was how the
simplified process helped in garnering more business.
As the simplified scheme was circulated only after June 2007, it was decided that
the impact study to be conducted only after a period of one year, to have
sufficient data to analyze. Now that the data of business under the scheme is
available for more than one year (Sept 2007 to Dec 2008), the study was taken
up.
The business under Agricultural Gold Loan at whole bank level over the years
was as under :
As on

Mar 2005

Mar 2006

Mar 2007

Mar 2008

Dec 2008

503

1247

2413

3275

3376

Business Level
(Rs. in crores)

The growth percentage during 2005-06 and 2006-07 was on high trajectory,
whereas during 2007-08 it looked a bit low.

However, a cursory glance at

individual Circles indicated that some Circles had sizeably increased the Gold
Loan portfolio.
1

OBJECTIVES
The objectives of this study were as under :
i. Compare the growth position in Gold Loans vis--vis total Agri Loans for the
last 3 years
ii. Compare the growth position in Gold Loans before and after introduction of
the simplified Gold Loan Scheme
iii. Identify the Circles / Modules where there was high growth after the
implementation of simplified scheme
iv. Bring out the success stories / campaigns of various Circles and provide
suggestions for success in other Circles.
METHODOLOGY
i.

The data available in MIS ONLINE on State Bank Times was used for
analysis.

ii.

Interactions with the operating functionaries for their feedback on their growth
in Agri Gold Loan portfolio.

iii. Ideas generated in the discussion on Agri Gold Loans in the discussion
forum hosted on State Bank Times by the Institute.

RESULTS & DISCUSSIONS

The data gathered from MIS ONLINE on the outstandings in Agri Gold Loans and
total Agri Loans indicate as under :
(Rs. Crores)
Portfolio size

Dec 2005

June 2007

Dec 2008

Agri Gold Loans

1150.98

2537.59

3375.72

Total Agri Loans

24564.09

36921.77

52314.74

The graphical presentation shown as under:

The growth in Agri Advances during Dec05 to June07 was 50%, whereas the
growth in Agri Gold Loans during the same period was 120%. However, the
growth in Agri Advances during June07 to Dec08 was 42% and the growth in
Agri Gold Loans during the same period was only 33%. This indicated that the
growth percentage in Agri Gold Loans could not be maintained in the second half
of the period under review.
3

Coming to the Circle-wise performance in Agri Gold Loans during the period
under review (ie., Dec05 to Dec08) indicated as under :
Rs.Crores
Circle

Dec' 05

June' 07

Dec' 08

Ahmedabad

0.42

1.16

33.03

Bangalore

9.28

18.38

42.07

Bengal

2.77

4.74

16.45

Bhopal

0.38

0.52

0.76

Bhubaneswar

9.70

12.79

12.59

Chandigarh

0.79

1.40

5.84

570.31

1733.12

1958.11

0.10

0.44

0.86

509.10

665.29

1018.02

46.49

75.57

282.91

Lucknow

0.16

0.27

0.37

Mumbai

1.45

1.46

3.05

--

0.06

1.22

0.03

0.17

0.44

Chennai
Delhi
Hyderabad
Kerala

North east
Patna
(Source : MIS ONLINE)

Gold Loan Portfolio

12.79

1.4

0.42

9.28

2.77

0.38

9.7

0.79

Bangalore

Bengal

Bhopal

Bhubaneswar

Chandhigar

570.31

0.44

Dec' 08

0.44

509.1

75.57

0.27

1.46

0.06

0.17

June' 07

46.49

0.16

1.45

0.03

Dec' 05

0.1

Circles

Patna

0.52

0.86

North east

4.74

1.22

Mumbai

18.38

3.05

Lucknow

1.16

0.37

Kerala

5.84

1018.02

12.59

Hyderabad

0.76

282.91

665.29

Delhi

16.45

1733.12

42.07

Chennai

33.03

Ahmedabad

1958.11

Circle wise performance indicated as under :

Chennai Circle topped the list with highest outstandings, but the growth during
Dec05-June07 (204%) was much more higher than during June07-Dec08
(13%). It was understood that the campaigns launched by the Circle in the first
half ensured highest growth, than the simplified loan in the second half.
The next topper Hyderabad Circle showed a growth of 31% during Dec05June07 and 53% during June07-Dec08. It was understood that the Circle was
doing well under the simplified model.
With a total outstanding of Rs.282.91 crores as on Dec08, Kerala Circle came
in the third position. The growth in this Circle during Dec05-June07 was 63%
and the growth during June07-Dec08 was at a spectacular level of 274%. The
push given by the Circle for gold loans was visible in the way the portfolio was
growing.
With an outstanding of Rs.42.07 crores as on Dec08, Bangalore Circle came to
a distant fourth position. The growth in this Circle during Dec05-June07 was
98% and the growth during June07-Dec08 was at a good level of 129%. The
Circle was pushing the product well by launching campaigns on an on-going
basis, like G-100 campaign.
These 4 Circles combined together had a share of Rs.3301.11 crores out of
total Agri Gold Loan portfolio of Rs.3375.72 crores of the Bank. This itself
indicated the very low performance of other Circles in this regard.

The performance of top 3 Circles was analyzed quarter-wise to have better

understanding in the growth pattern.

Agri Gold Loan

300

2500

250

2000

200

Outstandings

1500
Chennai

150

Hyderabad
Kerala

1000
100

500

50

Dec'
05

March' June'
06
06

Sept'
06

Dec'
06

March' June'
07
07

Sept'
07

Dec'
07

March' June'
08
08

Sept'
08

Dec'
08

Chennai

570.31 649.46 745.13 1143.7 1461.9 1638.8 1733.1 1916.2 2036.7 2124.4 1982 1892.9 1958.1

Hyderabad

509.1 511.61 506.43 567.43 661.07 667.62 665.29 747.01 837.35 842.86 818.2 846.97 1018

Kerala

46.49 47.36

47.13

55.56

62.17

69.78

75.57

Period

98.44

173.5 218.07 236.05 260.82 282.91

From the above graph, it could be interpreted that the growth in Chennai Circle
peaked up after June06 (well before the introduction of the simplified scheme)
and continued at the same tempo upto Mar08. However, the downfall till Sep08
and a marginal growth thereafter indicated a disturbing trend. And it was not
possible to interpret whether the simplification of Gold Loan helped the branches
or not.
While the performance of Hyderabad Circle was satisfactory all through the
period, the growth curve had reached a plateau and had not peaked up even
after the simplification process.

Thus, here also it was difficult to interpret

whether the simplification had any effect on improvement in portfolio.

Kerala Circle, which had a small portfolio till June07 with a very small growth
percentage, had peaked its performance and there was no looking back after
that. It was understood that the campaigns launched by the Circle coupled with
simplification of processes, helped in this achievement.
Further analysis down to the level of modules indicated the following :
Chennai Circle :
Agri Gold Loan - Chennai Circle
800
738.36
700
600

569.85

545.25
501.77

Outstandings

500
404.52

416.98

400
301

300
213.49

172.82

200
100
0

157.33

156.42

83.73

Chennai

Coimbatore

Madurai

Dec' 05

83.73

172.82

157.33

156.42

June' 07

213.49

404.52

569.85

545.25

Dec' 08

301

416.98

738.36

501.77

Module-wise

Tiruchirapalli

The Coimbatore module, Madurai module and Tiruchirapalli module were almost
at the same level in Dec05.

However, Madurai module peaked up before

June07 and also after June07. Coimbatore module also done well till June07
but the growth stagnated almost at the same level even in Dec08. However,
Tiruchirapalli module which peaked up till June07 showed a negative trend and
the outstandings fell down by Dec08. Chennai module had a normal continued
growth all through the period.
Hyderabad Circle :
Agri Gold Loan - Hyderabad Circle
450
411.32
391.21

400
350

Outstandings

300

273.14
249.27

250
212.88

191.43

200

157.68
150
105.71
100

71.39

57.81
50
0

33.4 37.17

Hyderabad

Tirupati

Vijayawada

Dec' 05

33.4

212.88

191.43

Visakhapatnam
71.39

June' 07

37.17

273.14

249.27

105.71

Dec' 08

57.81

391.21

411.32

157.68

Module-wise

Tirupati and Vijayawada modules which were leading from the beginning,
continued the same tempo during the entire period of 3 years with good growth
momentum. However, the growth percentage was better during the second half,
as could be seen above. The simplified loan might have helped in this regard.

TOP GOLD LOAN BRANCHES IN CHENNAI & HYDERABAD CIRCLES

CIRCLE

Module

Region Branch

June 07

Dec 08

Amt.

Amt.

outstan-

outstan-

dings

dings

Rs.lacs

Rs.lacs

(No. of loan (No. of loan

a/cs)
Chennai
Chennai
Chennai

Chennai
Madurai
Madurai

6
1
3

Sundarampalli
Madurai ADB

a/cs)

1512.93

3350.81

(5365)

(9629)

2208.32

2579.86

(6347)

(5583)

Chemanvilai

1948.97
(5464)

Chennai
Chennai

Madurai
Madurai

Hyderabad Vijayawada

3
3
1

Udangudi
Vilathikulam
Kakumanu

1509.72

2393.79

(5059)

(6837)

577.33

1400.60

(2347)

(5023)

746.85

976.31

(3904)

(4146)

Now, let us see the various campaigns launched by different Circles. While the
Gold Loan campaign in Chennai Circle was launched before simplification of the
scheme, the following campaigns were launched after the simplification of the
scheme.
10

CAMPAIGNS LAUNCHED BY DIFFERENT CIRCLES

BANGALORE CIRCLE
AGRICULTURAL GOLD LOANS : G-100 SCHEME
(Ref: CIRCO/137 dated 16.08.2008)
The details of the scheme are as under:
1) The targets include achieving:
a. Minimum 100 Gold loans by each branch
b. Minimum Rs. 50 Lacs disbursed through Gold loans by each branch
c.

Minimum Rs. 100 Crores levels by the Circle as at 31st March 2009.

2) The scheme was applicable to all branches that have potential for
financing under Agriculture.
3) The Scheme was in operation from 1st August 2008 to 31st December
2008.
4) During the campaign, processing charges for Agri Gold Loans were
50% of the applicable charges
6) Competent Authority had approved an incentive based approach for
Branches as well as Regions for promotion of the scheme.

The

incentives shall not be payable in cash and should be disbursed to each

employee in the form of a memento or gift card only.
7) Branches were advised to aggressively market the scheme and conduct
Gold Loan Melas. They were also advised to explore marketing gold
loans through SHGs / Business Facilitators / Co-operative Societies in
the campaign. Hut painting or Wall painting was also undertaken at
selected places. The awareness created through the publicity campaign
was to be effectively used to attract more business by the branches.
8) No shortcuts were allowed in the appraisal, sanction and disbursement
of loans, which were as per extant instructions.

11

CHANDIGARH CIRCLE
AGRICULTURE GOLD LOAN : INCENTIVE SCHEME
To popularize the Gold Loan scheme, the Circle had approved a Gold Loan
incentive scheme to encourage financing under Agri Gold Loan Scheme for
Rural and Semi Urban branches of the Circle. The incentive scheme was
implemented during the period 01-07-07 to 30-09-07 and the award was given
based upon the performance during the said period.

Targets were set for

branches as well as Regions for achieving the growth.

PUBLICITY BY KERALA CIRCLE
Golden Scheme for Farmers
NEW GOLD LOAN

Agri Gold Loan as KCC and ATL also.

Farmer can save on interest due to ongoing deposit/ withdrawal

facility.(which is not there when it is availed as a demand loan).

Need not wait for closing and opening new gold loan every time need
arises.

(Branches with no locker facility can suggest Gold loan as KCC to farmers)
BENEFIT TO BANK:

Reduction in work load.

Risk of purity checking every time is not there.

Most secure loan.

(See CIRCO ADV 94 dated 18-6-07)

12

VIEWS OF OPERATING FUNCTIONARIES

Even the simplification had not helped in improving the portfolio in other Circles
implied that there were other factors which might be hindering the growth. As all
the Circles were improving the overall agri loan portfolio year after year, the nonproliferation of Agri Gold Loan needed rationale for the same. The Institute tried
to get the views of the operating functionaries through the Discussion Forum
during Dec 2008 on the Agri Gold Loan scheme. The views were summarized
below.
Shri R.Yuvaraj, Manager, RCPC, Salem says :
Popularising a product requires meticulous planning taking into account the
infrastructure available at the branch and the potential for marketing the products
amongst the public. So when we want to market agricultural gold loans we have
to strengthen our internal response systems, facilities and the quality of service.
To elaborate on this aspect a few basic necessities are given:
a. The basic requirements for giving the loans i.e. application forms must be
available, weighing machines should be in condition, the operating staff the
permanent official as well as the officiating person should have undergone
sufficient training in appraising the gold ornaments and also be willing to
accept the responsibility;
b. The loans should be made available on any day even if the timings are fixed
and within a reasonable waiting time say one hour. This will create
confidence in the minds of the public that their need will be definitely fulfilled;
c.

The security environment is conducive for the people to wait and take the
loan;

d.

While redeeming the loan also the borrower should be able to remit cash at
the SWO counters within a reasonable time and take possession of the
ornaments;

13

e.

The intending borrowers should be assured that without any pressure or

recommendation the loans will be available. If necessary a board may be
displayed advising them to contact the Cash Officer directly;

f.

The campaign for gold loans can be taken up as a project in Quality Circles;

There are ever so many advertising methods to popularize the scheme outside
such as distribution of hand bills, putting slides in theatres, scrolling in cable
network, announcement through mobile vans with loudspeakers etc. The positive
aspects like low interest rates, charges, security for the ornaments should be
highlighted in the campaigns.

R. SAVITHA, OMR(RURAL), CHITTAR, RII, Coimbatore says

Agri gold loan is an easy and secured advance to our bank.

While sanction of

KCC needs pre-sanction inspection, document verification, land holding

verification. etc. which take considerable time, sanction of Gold Loan requires
much less time, as here the ornament purity is the most important item. So we
can get good and secured business, with minimum man power.

Most of our

branches easily achieve their budget because of gold loans. One of my cluster
branch sanctions minimum 18 loans per day because that cash officer has very
good knowledge about gold loans and its importance in achieving branch budget.
Encouragement by giving excellence certificate may motivate others also
towards this end.
D S Arunakumar, Manager (Training), SBLC, Dharwad says
There is a very large potential for gold loans business.

Generally Indians have

very strong family attachment for Gold ornaments. There is very little chance for
the loans becoming NPA as simple notice prevents them from falling into this
category.

There is Plenty of Gold in rural India and there is vast scope to

increase our business in this particular segment. This will increase our standard
asset portfolio which is very safe and profitable and also very useful to the farmer
in times of need. Gold loan business is hidden treasure for Bank.
14

P.Dharmalingam, Credit Officer, RCPC, Salem came with an innovative idea

as under :
The Bank is lending against various categories of assets - Immovable properties,
crops, equipments to name a few. In assets like crops, only the symbolic
possession is with the Bank and the borrowers enjoy the benefits. Can we
formulate a scheme under which the gold ornaments will be in the custody of the
borrowers and the Bank will extend finance. Whatever precautions or
conditions applicable to the other borrowers like insurance, inspections etc can
be applied to such advances also. Such an arrangement will eliminate the need
to keep the ornaments in the Bank and the related security arrangements.

Srinivasan Venkateswaran, Assistant General Manager, IT-ALM Department

says
From the early days of the birth of SBI, Crop Loan and Agricultural Gold Loan
were the two most popular and well known schemes in the rural areas. Even for
the bank, this scheme is very easy to handle for the staff. For the rural folk,
taking gold loan is very easy and in most cases repayment is assured as the
rural womenfolk has sentimental attachment to the gold ornaments. I will narrate
how these branches handle the portfolio.
The Cash Officer (presently the cash in charge) of the branch keeps with him
sets of Ag Gold Loans. He invariably gets the documentation done one hour
before the start of the days work when he is relatively free. Hence the customer
gets the money within an hour of opening of the cash counter. I know of many
cash officers and special assistants who handled cash, earning huge amount as
incentive during 2005-06 when the bank had a scheme for payment of incentive
for the gold loans sanctioned. Basically, the person who is cash in charge of the
branch should be service minded. There is huge untapped potential of
Agricultural Gold Loans in our branches. Once the news spreads that SBI is
freely sanctioning such loans, there will be a Q for availing Ag Gold Loans. If the
cash in charge keeps a diary for following up the payment and touches
15

the borrower in time, there will be no NPAs in this segment. I used to contact the
wife of the borrower whenever my branch Ag Gold Loans were about to become
NPA. The wives never allowed their ornaments to be sold in auction under any
circumstances and pressurised their husbands to some how settle the matter
with the bank.
Ultimately timely sanction of loans without making the applicants visiting the
branch more than once, timely reminders, auction notices when the resale value
is much more than the loan outstandings, will help to keep a healthy Ag Gold
Loan portfolio. The customers should know that whenever they require urgent
funds, SBI will come to their rescue.

16

AVAILABILITY OF POTENTIAL
Report of the Technical Group Set up to Review Legislations on Money
Lending dated 24th July 2007 (headed by Shri S.C.Gupta, Legal Adviser-inCharge, Legal Department, Reserve Bank of India) in its report stated as under:
QUOTE
The AIl India Debt and Investment Survey (NSS Fifty-Ninth Round) has revealed
that share of institutional agencies in the total cash dues of urban households
had increased from 72 per cent in 1991 to 75.1 per cent in 2002 and that of
moneylenders had also increased during the period from 10.2 per cent to 14.1
per cent. In the case of rural households, on the other hand, the share of
institutional agencies had in fact declined from 64 per cent in 1991 to 57.1 per
cent in 2002. And more significantly, the share of moneylenders had increased
in the same period from 17.5 per cent to 29.6 per cent in the case of rural
households.
The survey reveals that out of every Rs.1,000 outstanding of farmer households
in the country, Rs.257 was sourced from moneylenders. The share of
moneylenders in the indebtedness of farmer households in Bihar, Manipur,
Punjab, Rajasthan, Tamil Nadu and Andhra Pradesh were well above the
national average, with Andhra Pradesh at the top. The penetration of
moneylenders is significant even in States that are regarded as being adequately
banked (Andhra Pradesh and Tamil Nadu).
In the profile of Informal Credit Providers the report further states that :
Various categories of informal credit providers are in existence in most of the
States where the survey was conducted. The categories of informal credit
providers in order of frequency are pawnbrokers followed by input suppliers,
arthiya/commission agents, kirana shopkeepers, lender against land, etc.
According to what was reported by the 11 Regional Offices of the RBI there were
12,601 registered moneylenders as on March 1995. This number has increased

17

to 19,627 as on March 2006. Anecdotal evidence suggests that there is a

corresponding increase in unregistered moneylenders.
Their mode of operations, viz, maintaining inter-personal relationship with the
borrowers, their informal approach, round-the-clock availability of finance, etc.,
has made them the most important lenders in the villages. Their policy of 'any
time, anywhere, any amount', which is borrower-friendly, has strengthened their
position in the villages, thus reducing the role of banks. They offer a variety of
products tailor-made to the needs of the borrowers.
Amount lent by moneylenders: District officials from only five States could furnish
the data on the amount of loan advanced by the moneylenders in their
jurisdiction as under:
Name of State

Amt. in Rs. Crore

As on March 1995

As on March 2006

Gujarat

38.34

139.65

Maharashtra

29.90

82.28

Kerala

25.00

138.00

Karnataka

19.22

87.70

Uttar Pradesh

34.22

181.92

Purpose: The loans provided by the informal credit providers were generally
short-term in nature and mainly for the purpose of meeting social obligations
associated with weddings, birth or death ceremonies. Loans for farming and
livelihood were also common.
Security obtained: Mostly all the loans were granted against the security of
gold jewellery, land documents, cultivation rights, promissory notes and even
against utensils.
UNQUOTE
The available data as above indicated that the moneylenders are still
thriving, where our branches were not able to market the safest advance
i.e., Gold Loan.
18

COMPETITORS MOVES
Not only that, Manappuram General Finance & Leasing Ltd. proudly
advertises in its website as well as airs in FM radios that
Welcome to India`s Largest Listed and Highest Credit Rated Gold Loan Company!

GOLD LOAN or Loan against Gold

Pledge your gold ornaments with us and draw cash against it.

Depending on the weight and purity of the gold, cash will be

disbursed.

We have various Schemes that will enable you to make your favourable choice !

Attractive features:

Loan availed within minutes.

Highest Amount availed per gram of Gold.

Diminishing interest rates.

Pay interest only for the number of days your pledge is with us.

Various schemes to suit all income classes of people.

No other hidden charges.

Of course, this company could do well by achieving a Gold Loan portfolio of

Rs.149 crores as on 31.03.2009, up from Rs.60 crores as on 31.03.2009

19

Muthoot Finance, banking and finance wing of Muthoot Group announces :

Muthoot Finance is the largest gold banking portfolio in India. It is the fastest and
most flexible branded personal loan product. It has a gross annual investment
portfolio of over Rs.100 billion against gold securities.

An ISO 9001:2000

certified organization, Muthoot Finance has a growing network of over 1000

offices across 20 states.
Gold Power Loan
Maximum Per Gram Rates.
Fastest disbursement of Loans.
Rates of Interest starting from Rs.1.16 per month.
8 different Schemes suiting all Categories.
Only Identity proof required.
Any Person No Account required.
Interest only for actual number of days.
100% insured and Gold kept in strong rooms only.
Any time redemption facility with out penalty.
Special reward points for M-Power Cardholders.
Business Line edition of May 02, 2009 says that :
TRUE VALUE GOLD LOAN
The (Muthoot) group has recently launched new True Value Gold Loan Scheme
offering loans at the rate of 14 per cent interest with no service charges. Interest
is calculated only for actual number of days even if it is for one day. This has
been a huge success and the company has disbursed over Rs.1,000 crore in the
scheme during the last two months alone.
The Muthoot Finance Ltd achieved a total business turnover of Rs.14,500 crore
in the last fiscal. In a month, the company disburses Rs.1,500 crore as loans
against gold and distributes one lakh money transfer remittances across the
country.
It achieved 50 per cent loan growth and 51 per cent growth in secured
debentures collection during the last fiscal.

20

CONCLUSION
All the indicators discussed in previous pages explain that there is plenty of
potential available in the market for Gold Loans. But, the branches are not able
to encash that potential.

An earlier study conducted by this Institute on Potential for Agri Gold Loans in
Ahmedabad Circle brought out the following observations :
62% of respondent farmers are not aware of Agri Gold Loan being
provided by SBI.
Sources of Agri Gold Loan from private money lenders constitute 47% and
those from Co-operative Banks constitute 33% leaving the share of SBI
and other PSBs at 10%.
Present marketing effort on the part of branch officials is not upto the
mark. It needs greater attention to make the farmers community aware of
our product.
There appears to be mental block on the part of Cash Officers / Sr.
Assistant or Special Assistant in charge of cash not to finance gold loan.

The figures of Agri Gold Loan in Ahmedabad explain the situation. The Agri Gold
Loan portfolio was Rs.0.42 crores as on Dec 05 and in June 07 it was Rs.1.16
crores. The figure went up to Rs.33.03 crores mainly because of business came
from e-SBS. This amply shows that e-SBS could garner a portfolio of nearly
Rs.30 crores in the same State, whereas the erstwhile Circle could not do the
same.

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Thus, it can be concluded that,

More marketing efforts are needed to capture the potential available in the
market.
The mindset of operating functionaries to be changed positively towards
sanctioning of Agri Gold Loans.
As the NPA percentage is very low, i.e., 0.23% and the interest income is
lucrative, branches should try to improve the portfolio to achieve their agri
budgets.
Controllers should motivate the branch functionaries to go ahead in Agri Gold
Loans and suitable targets to be fixed to achieve the business.
If not captured now, the business will go to small size firms like NBFCs. Why
lose it when the customer is banking with us for other purposes? Cross-sell
Agri Gold Loan to every farmer-customer to Achieve Great Level in branch
business.

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