Greater Bank bets big on gold loans
Mumbai: Urban cooperative lender Greater Bank, which has touched Rs 100-crore mark in lending against gold jewellery business, aims to double its portfolio in the segment in the next 12 months.
The bank has its entire network in Mumbai metropolitan area and has seen gold loan portfolio touch a seventh of its total assets of Rs 700 crore, within 18 months of introducing the product, its Chairman Narendra Baldota said.
He added that banning co-operative banks from letter of credits (LCs) discounting resulted in the bank posting a reduction in assets, due to which it had to enter the gold loan segment.
"When LC was stopped...What to do, what other business to do? So we entered the gold loans area," Baldota said.
The Reserve Bank has expressed concerns over risks emanating from gold loans and has put a slew of measures including a drastic reduction in the loan to value ratio for the non-bank lenders because of the concentration risks.
Baldota said his bank continues to be bullish on the gold loans segment and added that its share will continue to remain at the current level of around 15.7 percent.
In the next 12 months, the bank is targeting another Rs 100 crore addition in the gold loan assets and take the total portfolio to Rs 200 crore.
Managers at each of the bank's 22 branches have been given targets for gold loans. Each branch has a specialised valuation machine due to which it has been able to get the turnaround time down to 30 minutes to give out the cash.
The average ticket size for loans under the category stands at Rs 25,000 and the loan to value ratio of 75 percent is followed strictly, he said.
A total of 8,000 people have borrowed Rs 100 crore, of which 75 percent were new customers, he said, adding the gold lending drive has also resulted in opening of 6,000 savings account with the bank.
The repayments for the one year maturity loans are good and there is zero NPA from such lending, he said.
During the next two years, Baldota said the bank plans to inaugurate two new branches per annum and they will be within the Mumbai metropolitan region, he said.