After the State Bank of India, now another large public sector Canara Bank has crossed Rs one trillion mark for outstanding gold loan book in June 2022. The Bengaluru-based lender is looking to expand its gold loan portfolio by over 30 per cent year-on year (YoY) in the current financial year ending March 2023 (FY23).
Out of Rs one trillion book, the overwhelming share is of agriculture segment (over Rs 90,000 crore) and balance is from two other segments – personal and MSMEs. Bank is making course corrections to strategy to enhance share of personal and micro and small enterprises (MSMEs).
Bhavendra Kumar, Chief General Manager, Canara Bank, said earlier the bank was focussing on agriculture gold loans – term loans as well short term credit. Now bank thrust will also be on personal loans and MSMEs, he added.
As for MSME, a lot of customers are coming for gold loans to bridge the working capital gap, Kumar said, adding that there will be a huge demand in this segment for immediate fund requirements.
Besides growing business volumes, the rising input costs is driving the demand for working capital.
In Canara Bank, the maximum loan tenure of loans against gold collateral is two years. The interest rates vary between 7.4-7.65 per cent.
Lender wants to scale up the gold loan portfolio to a level of Rs 120,000 crore by end of March 2023 with a share of personal loan of Rs 5,000 crore and MSME of Rs 2,000 crore. This loan book has seen a steady rise from Rs 54,000 crore in March 2020 to around Rs 77,000 crore in March 2021 and further to over Rs 92,000 crore in March 2022.
At present, much of the gold loans business is concentrated in South India. Tamil Nadu and Kerala are big markets for gold loans where competition is also intense. Canara Bank is pushing this business in Eastern region and two metropolitan areas – Mumbai and Pune.
Besides working through 243 plazas (dedicated areas carved out in branches), bank will also dispense gold loans through co-pending partnerships, Kumar said.