Gold Loans Surge as Borrowers Tap Rising Value of Jewellery

KURNOOL: Gold loan demand has increased across Andhra Pradesh, with an estimated 80,000 to one lakh people approaching lenders every day for loans against jewellery.

Bank officials said the trend had become more pronounced since the beginning of the kharif season. AP has more than 10,200 bank branches, around 70 per cent of them in rural areas. Nearly 8,000 branches are currently handling gold loan transactions, with each receiving at least 10 applications a day, officials said.

Rising gold prices have increased the loan amount available against the same quantity of jewellery, prompting more people, including farmers, to pledge their ornaments.

“The rise in gold prices has brought more customers seeking gold loans. Our branch receives at least 20 applicants every day. Depending on the value and quality of the gold, loans can be sanctioned against a substantial quantity of jewellery,” said C. Chennakrishna, a Canara Bank manager in Nandyal district.

Bank officials estimate that 160 to 200kg of gold jewellery is being pledged with banks across the state every day.

M. Nagabhushanam of Pendlimarri in Kadapa district said he pledged 10 tolas of gold with the Andhra Pragathi Grameena Bank and obtained a loan of `5 lakh for kharif expenses and his children’s education.

“As gold prices have increased, the loan amount available against my jewellery has also gone up. I could raise around `70,000 against each tola of gold,” he said.

Farmers are also changing their borrowing pattern, with many taking loans in stages according to their agricultural requirements, first for field preparation and later for fertilisers and other expenses.

Paila Bhaskar of Emmiganur said many people had pledged gold in June to pay school and college fees.

“Many families did not have enough cash for education expenses because agricultural work was limited. They pledged gold and paid the fees. Farmers are also taking loans in smaller amounts for farm operations,” he said.

The demand is not confined to nationalised and rural banks. Private gold finance companies, numbering up to around 2,000, are also attracting borrowers, though their higher interest rates make them a less preferred option for many customers.

SBI senior manager B. Sunil Kumar said gold loan rescheduling had also increased recently.

“A farmer who earlier borrowed `1 lakh can now reschedule the loan and become eligible for up to `2 lakh, taking advantage of the higher value of gold. This is one reason for the increase in rescheduling requests,” he said.

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Gold Loan Scenario in AP

Total bank branches 10,200

Bank branches handling gold loan transactions 8,000

Gold loan applications received per branch per day 10-25

Gold loan applications received per day 80,000+