Central Bank eyes tie-ups to increase gold loan portfolio

Central Bank eyes tie-ups to increase gold loan portfolio

Vijay C Roy

Tribune News Service

Chandigarh, September 3

Having entered into a strategic co-lending partnership with Dhanvarsha Finvest to offer loan against gold in Madhya Pradesh, public sector lender Central Bank of India is looking for similar kind of tie-ups to increase its gold loan portfolio. Currently, the bank’s gold loan portfolio is worth Rs 10,000 crore and it witnessed a growth of 10% in 2020-21 as compared to the previous fiscal. Amid the Covid pandemic, there has been a significant rise in gold loans in the past one year. The demand is coming from individuals, traders and small businesses.

“We have recently partnered with Dhanvarsha Finvest, which has a significant presence in the western region, to offer gold loans. Currently, we are doing a pilot in Madhya Pradesh and depending upon the response, we may have similar kind of tie-ups with other platforms to strengthen our reach across the country,” said Rajeev Puri, executive director, Central Bank of India, in an interaction with The Tribune.

The participation by both entities in this co-lending arrangement will result in greater expansion of the portfolio by the Central Bank of India and Dhanvarsha Finvest, a non-banking financial company having significant presence in Maharashtra and Madhya Pradesh.

As per the agreement, Dhanvarsha Finvest will originate and process loans against gold ornaments as per jointly formulated credit parameters and eligibility criteria and the Central Bank of India will take into its book 80% of the gold loans under mutually agreed terms. Gold loans are often the first choice of borrowers as the rate of interest is lower than personal loans. It is also a preferred option by a borrower who has an average-to-low credit score.

The gold loan would be offered under priority sector at competitive rates, subject to the compliance with the applicable law(s), including the applicable guidelines issued by the RBI.

On being asked about the focus areas, Puri said, “Our focus area would be retail, agriculture and MSMEs. Currently, these three sectors constitute 65% of our total credit portfolio. We are targeting to take it to 70% by the end of this fiscal.” He said in order to expand the reach, especially in rural and semi-urban areas, the bank has plans to double its banking correspondents'' network from 7,000 to 15,000.

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