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GOLD LOAN 2018

WELCOME

Star Gold
Advance Against Security of Gold/Gold Jewellery
(Master Circular HOBC No. 111/127 Dt. 17/11/2017)

Loan against Gold Jewellery


 Right value for your Gold at low interest rates
 Quick disbursal
 Minimum documentation

LOAN AGAINST SECURITY OF GOLD


Scope of the Scheme:

 The scheme would be implemented by all branches.


 The branches in the states where this scheme is not presently implemented would obtain prior
approval of their respective Zonal Offices.
 Zonal Offices shall implement the scheme in a phased manner after ensuring provision of
proper infrastructure including security and manpower.
 For operational and security reasons, Zonal Managers are authorized to exclude identified
branches from the purview of the scheme.

STRATEGIES FOR GOLD LOAN

 Staff of the branches should update themselves about recent ‘Star Gold Loan Scheme’
circulated by HO.
 Banners at the prominent places in the Branch premises are to be displayed.
 Branch staff should be aware of the schemes of other competitors.
 Banners are also to be displayed at Gram Panchayat Office, Village Dispensary (Rural Health
Centre), Public Liabrary, etc.
 Preparation of scheme leaflet in local language and distribution amongst the local/ rural
populace.

ELIGIBILITY

 Any individuals (except Pawn broker, Jewellery shop owner, jewel appraisers and their close
associates) either singly or jointly, who maintains SB/CD account with the Branch are eligible.
 Bank's staff, as well as their spouse.
 Proprietorship concerns, Partnership firms and Companies are not eligible under the scheme.
 Branches should ensure that the proponents should have capacity to service the loan.
PURPOSE

 Agriculture: Gold loans for meeting crop production expenses or for allied agricultural activities
like diary, poultry, fisheries, etc.
 Other Priority Sector: Gold loans can also be sanctioned for all eligible purposes under other
priority sectors.
 Non Priority Sector/ Consumption Loan: Gold loan for consumptions purposes are sanctioned
to meet unforeseen expenses/ contingencies/ medical treatment/ for marriage and other
ceremonies etc.
 The loan amount will be sanctioned based on a declaration by the borrower.
 Gold loans will not be covered under CGTMSE scheme.

INTEREST SUBVENTION /TAT

 Gold loan extended as a crop loan to an agriculturist is eligible for claiming interest subvention,
provided the quantum of loan is based on prescribed scale of finance and utilized for the same.
 Borrowers covered under Debt Swap can also be covered under this scheme upto a limit of
Rs.25000/-
 TAT- Gold loan is taken in emergencies and urgent needs. Therefore it should be financed
within shortest possible time. We propose that branch should keep TAT not exceeding 15-25
minutes either for extending or redemption of loan.

LIMIT UNDER GOLD LOANS

Limit under gold loans is to be assessed as under:


Loan amount requested by applicant/ assessed amount on declaration;
OR
 75% of the appraised value of gold ornaments of 22 carat fineness for short term not exceeding
I year;
 70% of the appraised value of gold ornaments of 22 carat fineness for term above 1 year but
not exceeding 2 years
 60% of the appraised value of gold ornaments of 22 carat fineness for term above 2 years but
not exceeding 3 years
OR
Loan amount assessed based on scale of finance for crop production/ actual amount of credit
requirement for other than crop production, as the case may be.

MARGIN VALUATION
N.B.:- Specially minted gold coins sold by any Bank (24 carat fineness) shall be treated as gold
ornaments for loan assessment purpose.
Card Limit/ Valuation: The gold price disseminated by the ‘India Bullion and Jewellers Association’
would be updated (last 30 days average price of gold) in Finacle (Menu GOLDLNRT) on weekly
basis (every Monday) by Agriculture Finance Department and once system stabilize, the
updation of gold price will be done on daily basis.
NB:-Introduction of Gold Testing Machine/ Gold Purity Analyzer Machine.

INSURANCE REPAYMENT

Insurance:- Gold ornaments/articles/coins pledged with the Bank under the scheme are covered
under the General indemnity Insurance Policy. As such, there is no need for obtaining an
insurance cover for these items at Branch level.
Repayment period: Should be repaid on monthly/ quarterly/ half yearly/ yearly basis. Accounts
which are overdue for payment beyond due date should be followed up vigorously for recovery.
Second Appraisal of Gold Jewellery: Second appraisal required, if per account limit is Rs.3 lakh
and above, where gold loan portfolio of the branch is of Rs.20 crore and above.

OTHER TERMS AND CONDITIONS

Security:
i) Pledge of gold ornaments
ii) Pledge of tamper proof gold coins issued by our Bank/ other banks.
Restriction of Gold coin: RBI is proposed to restrict the weight of ‘Gold Coins’ to 50 grams ‘per
customer’ while granting advance against the security of specially minted gold coins.
Quantum of Advance:
For Agriculture/SME/Retail/OPS:
Minimum: No limit
Maximum: Rs.15,00,000/- (It can be raised up to Rs.25,00,000/- with the approval of GM, NBG)
For Other Purpose:
Minimum: No limit.
Maximum Rs.10.00,000/-

RATE OF INTEREST

1. Gold loan for agriculture purposes

a. For Demand Loan-Repayable in 12 months or 18 months: 8.30% (1Yr.MCLR) + 0.10% (BSS) + 0%


(CRP) = 8.40% up to Rs.3 lakh
For short term working capital for 12 months or 18 months crop loan & allied activity: 8.30%
(1Yr.MCLR) + 0.30% (BSS) + 0% (CRP) = 8.60% above Rs. 3 lakh
When subvention is claimed up to Rs.3 lakh : 7%
Prompt payee farmer : 4%

b. Other than Crop loan/ KCC/Term loan:


8.30% (1Yr.MCLR) + 0.30% (BSS) + 0.30%(CRP)= 8.90% up to Rs 5 lakh
8.30% (1Yr.MCLR) + 0.30% (BSS) + 1.30%(CRP)= 9.90% above Rs 5 lakh
2. Gold loan for non-agriculture / SME / OPS purposes up to 2 years:
8.30% (1Yr.MCLR) + 0.30% (BSS) + 0.30%(CRP)= 8.90% up to Rs 2 lakh
8.30% (1Yr.MCLR) + 0.30% (BSS) + 1.30%(CRP)= 9.90% above Rs 2 lakh
Same ROI against pledge of Sovereign Gold Bond as per the above scheme
Aggregation of per borrower to be taken into account while charging ROI

SERVICE CHARGES

Processing Charge:-
A) Agriculture Gold loans-
Loan upto Rs.1 lakh: Nil
Over Rs.1 lakh to Rs.5 lakh: Rs.150/- per lakh Max. Rs.300/-
Over Rs.5 lakh: Rs. 150 per lakh
B) MSME/OPS loans-
Loan upto Rs.1 lakh: Nil
Over Rs.1 lakh: Rs.150/- per lakh
Documentation Charges:-Nil
Inspection Charges :-Nil
Commitment Charges :-Nil
Handling Charges :-Nil
Valuation charges:-
Rs.5/- per Rs.1000/-
Min. Rs.100/- Max.Rs.500/- per valuation.
Appraisal/ Valuation charges for second appraisal will be borne by the Bank wherever applicable
including in the cases of infructuous advances

PRUDENTIAL NORMS

Loans granted for Agriculture purpose.


The accounts will become NPA if installment of principal or interest thereon remains overdue
for 2 crop seasons for short term crops and one crop season for long term crops, provided
facility financed for:-
 Raising crops
 Production & Investment of agriculture.
 Purchase of land for Agr. purpose by SF/MF.
 Distressed farmers to repay debt to non-institutional lenders.
 Taking up pre/post-harvest activities.
Loans granted for other than Agriculture:
Overdue for > 90 days - Become Sub Standard asset if prescribed margin by RBI i.e. 25% is
not maintained as per the card rate applicable from time to time. (Ref.Br.Cir.No: 107/187 dt.
11.01.2014)
Over Draft/Cash Credit:
NPA if o/s remains continuously in excess of SL or no credits continuously for 90 days or
credits are not enough to cover the interest debited for the same period.
SANCTIONING AUTHORITY
As per existing delegation of powers for sanction of loan against gold ornaments :
Authority Limit
Scale – I Rs. 4 lakh
Scale – II Rs.10 lakh
Scale – III & Above Full powers
Gold loans may also be sanctioned to Bank's staff, including staffs posted at Zonal Office
and Head Office as well as their spouse (provided ownership rests with them) by Branch
Managers (except the Branch Manager's spouse) without seeking prior sanction from Zonal
Office.
DOCUMENTATION
1. For limits up to Rs.1.00 Lakh (Demand Loan/Cash Credit/ Over Draft/ Term Loan) documents to
be obtained are as under:

 Application-cum-Valuation-cum-Sanction letter (modified in Aug. 2017) (Annexure-I)

 Demand Promissory Note. (Annexure-II)

 Unstamped Loan-cum-Agreement of Pledge of Gold Ornaments (AG-35 revised


Aug.2017) (Annexure-III)

 Undertaking-cum-declaration for gold loans upto Rs.1.00 lakh (as per Annexure-IV)
for agriculture purpose only.
2. For limits above Rs.1.00 Lakh (Demand Loan/Cash Credit/Over Draft/ Term Loan), documents to
be obtained are as under:

 Application-cum-Valuation-cum-Sanction letter (modified in Aug. 2017) (Annexure-I)

 Demand Promissory Note. (Annexure-II)

 Stamped Loan-cum-Agreement of Pledge of Gold Ornaments (AG-35 revised


Aug.2017) (Annexure-III)

 Undertaking-cum-declaration for gold loans above Rs.1.00 lakh [as per Annexure-IV
(a)] for agriculture purpose only. A copy of land documents, latest land revenue
receipt and cultivation details should be obtained.
PRECAUTIONS TO BE TAKEN
• Gold ornaments with purity less than 18 carat not to be financed.
• In case of gold belonging to wife as `Stridhan’, wife of the borrower should also be made
as co-borrower. Waiver of the stipulation is to be considered at ZM level on merits.
• Valuation to be done in the presence of Bank staff invariably.
• While appointing Appraiser, meaningful due-diligence to be carried out to protect the
Bank’s interest.
• Proper safe keeping of gold ornaments of the borrower to be ensured.
AUCTION OF GOLD ORNAMENTS

 When an advance has been recalled and repayment is still not forthcoming, the Bank
has the right to sell the gold ornaments/ coins pledged, after giving reasonable notice
to the borrowers.

 If the account is not put in order within the time stated in the notice, the ornaments/
coins should be put up for auction with the prior approval of the Zonal Office.

 If the loan is not paid on a demand notice being made, the gold ornaments/ coins
pledged will be sold in public auction. The Bank shall have right to recover from the
borrower the balance due if any, after sale of the pledged gold.

 Gold ornaments/ coins have to be auctioned in the presence of gold appraiser and
two good witnesses of that locality and shall be taken up on as-is-where-is basis as far
as possible. The auction should be conducted in the same town or taluka in which
the branch that has extended the loan is located.

 Reasonable opportunity should be given to all borrowers to redeem the gold


ornaments/ coins to avoid auction of the gold.

 Care should be taken that bid amount should not be less than the amount to be
recovered as per the account, publication charges and tax on auction (as per
applicable rules) etc. Every effort should be made to realize the full market value of
the security pledged.
END OF THE MODULE
For any further clarification, please contact Head Office Bu-Rural dept.
THANK YOU!

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