State Bank of India (SBI) is adopting an aggressive approach in the retail and MSME gold businesses, targeting 3x growth in this portfolio to Rs 20,000 crore by March. It will leverage YONO, the digital banking platform, to cut down on response time and scale up activity. Cheap deposit money, which helps offer low lending rates, gives banks the edge over gold loan companies.

Yet, they have lost out because of a longer turnaround time — time taken to sanction loans — while the likes of Muthoot and Manappuram act quickly, being close to customers.

C S Setty, managing director (retail and digital banking) of SBI, said bank loans are cheaper by 200-300 bps (compared to gold loan companies). Using the digital lending platform, the turnaround time now is 30 minutes, compared to two hours earlier.

The pandemic has changed customer preference. It is a big opportunity as there is greater acceptability of digital channels for doing banking transactions now. SBI will scale up YONO and further strengthen the platform through new product offerings like personal gold loans, says the FY20 annual report.

SBI is already processing 4,400 applications for personal gold loans on YONO, plus manual operations each day. Besides personal loans, SBI has begun gold loans for SMEs on YONO. It has extended loans to 3,400 borrowers. The gold loan portfolio — retail and SME — is Rs 6,000 crore now, which banks expect to ramp up to Rs 20,000 crore by March, said Setty.

Further, about 15,000 applications for agricultural gold loans are being executed on YONO.

The agri loan portfolio is of Rs 57,000 crore. These are short-term loans for 3-6 months’ tenure. Therefore, the outstanding loan book in agriculture gold credit does not show a sharp rise. The volume of loans per month is an important indicator for farm gold advances, added Setti. With gold prices ruling at dizzy heights, lenders have been exposed to price volatility. In this regard, SBI has put in place a system of dynamic monitoring of gold prices (on a daily basis) to enable prompt decision making.

Recently, the RBI raised the cap on loan-to-value ratio (LTV) to 90 per cent from 75 per cent for gold loans by banks.