PUNE/NEW DELHI: The country's largest lender, SBI, is aggressively marketing its
gold loan scheme for farmers to prevent defaults after the agriculture sector witnessed a sharp spike in bad debt in the past one year.
The bank is offering loans up to 80% of the value of gold deposited by farmers at an interest rate of 4% after subvention. Under the interest subvention scheme of the Centre, banks provide agriculture loans for a year at 7% interest. It offers an additional 3% subsidy on timely repayments, bringing down the effective interest rate to 4%.
A branch manger from Patna confirmed that bank employees are pushing this product to farmers rather than the normal agriculture sector loans. "It is being promoted as quick loan. Also, we will not be bothered if they will repay or not as the gold collateral is already there," he said.
State-run banks have met almost half of their agriculture sector lending target of Rs 4,75,000 crore till September 2011. But this lending may take a big toll on their bottom line. Till March 2011, the total non-performing farm loans were Rs 16,659 crore, 3.3% of total outstanding advance given towards agriculture.
The agriculture gold loan scheme is not limited to SBI as other banks are also pushing similar products. "To secure a loan, you have to provide a list of documents that include land verification and crop cultivation pattern. Further, an assessment officer will go and verify before the loan is disbursed. The new scheme ensures quick loans," said an official with Indian Bank.
But bank officials have confirmed that there are chances of misuse. According to officials at SBI's Nashik branch, the bank has come across an instance of a farmer picking up cheap loan against gold and lending it at higher rates and using part of the money to buy more gold.
Source @EconTimes
