Agriculture Gold Loan
Disclaimer clause – Requested to go through the Bank’s circulars before any acts or taking any decisions.
Why agriculture gold loan? Gold loan in agri segment is one of the safest advances registering low NPA. Vast potential available for increasing this loan portfolio in agri business in all the Circles. RBI has also reduced the risk weightage on loans upto Rs. one lac against gold and silver ornaments from 125% to 50%. Therefore, financing under this portfolio will ease the capital adequacy ratio of the Bank. What are the facilities available under agriculture gold loan? Demand loan/Cash Credit/Overdraft/Term Loan against the security (pledge) of Gold / Silver ornaments /wares may be granted to farmers to enable them to meet their short-term and long-term agricultural credit needs i.e. both for crop production needs and also for meeting investment needs. Such loans are reckoned as direct finance to agriculture. Who are eligible for agriculture gold loan? Any person engaged in agriculture or allied activities as well as persons engaged in activities permitted by RBI to be classified under agriculture. It is not necessary to insist for land record extracts or physical inspection of the farm before sanction of Gold loans. Advance Value Most of the financial dailies publish prices of 24 carat gold on daily basis. Based on the prices of gold published in the financial dailies preferably “Economic Times” and “Financial Express”, the Circle Management Committee at each LHO fixes every month, the prices of gold of 18/22/24 carat purity. Which is circularize and advise to the branches by the circle in their circles. These gold prices are valid for that month only. The price of 22 carat and 18 carat gold can be calculated by multiplying the price of 24carat standard gold with 22/24 and 18/24 respectively. The advance value (per gram) for sanctioning the loan will be the price of gold advised by the LHO less margin. Margin A margin of 30% should be retained. However in certain deserving cases, reduction of margin, upto 25% may be permitted by the sanctioning authority not below the level of Branch Manager. It should always be ensured that the margin does not fall below 25% unless there is a default in the repayment. Quantum of loan The amount of loan that can be granted against the security of Gold/Silver ornaments should not be higher than the advance value of the Gold /Silver ornaments pledged. Application and appraisal The Applicant farmers should submit the prescribed application, appraisal cum-arrangement letter (SIM – GL/1) along with a prescribed Gold Ornaments take delivery letter (SIM – GL/2). Cash Officer has to certify that the gross and net weight of gold ornaments, their advance value have been verified by him and are correct.
Procedure for accepting gold ornaments The gold ornaments offered as Security should be delivered to the Bank along with Take Delivery Letter, vide SIM - GL/2, duly completed and signed by the borrower(s). Each ornament or a group of ornaments of similar type / fineness should be entered separately in the Take Delivery Letter. In the case of illiterate borrower, witness letter vide SIM - GL/3, should be obtained from the witnesses who were present while the illiterate borrower executed the various loan documents including the Take Delivery Letter. The borrower may be issued an acknowledgement for the ornaments offered as security for the loan, vide SIM - GL/8. Purity of gold Branch Cash Officer / Award Cash Officer (Special Assistant / Senior Assistant in-charge of cash) is responsible for ensuring genuineness and purity of gold ornaments by using the following methods. (a) Touch Stone Method Under this method, the gold ornaments are rubbed against the touchstone and the impression is compared with the impression of the standard gold.
(b) Nitric Acid Test
Nitric Acid when applied in pure gold makes no impression / reaction. Few drops of nitric acid are to be...
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