Indian Overseas Bank has decided to take its nimble-footed non-banking finance company rivals head on in the gold loans space. Taking a leaf out of its competitors' books, the public sector bank plans to establish standalone branches in metropolitan cities to cater to the demand for loans against the yellow metal.

The bank wants to set up about 25 exclusive gold loan outlets in the four metros – Mumbai, Delhi, Kolkata and Chennai – in the next one year.

The bank's gold loan portfolio of around Rs 7,700 crore comprises loans given to farmers against the security of the precious metal.

“We are witnessing a good traction in the gold loans business. We have about 14 per cent market share in this line of business. Given the deep inroads being made by non-banking finance companies, we feel the time is ripe for us to open exclusive outlets to cater to the demand for gold loans,” said Mr M. Narendra, Chairman and Managing Director, IOB.

So far, the bank's branches relied on jewellers to test the quality of the precious metal being offered as security by borrowers. As these jewellers are not necessarily at the beck and call of branch officials, there is some delay in disbursing loans against gold. So, customers needing funds urgently invariably gravitate to NBFCs as they sanction and disburse loans immediately.

“Now that assaying machines are available in the market, each designated branch dealing with gold loans will have one such machine. Our staff can check the quality of gold on their own and disburse loans in 15-20 minutes,” said Ms Nupur Mitra, Executive Director.

With the Reserve Bank of India clarifying that loans sanctioned to NBFCs for on-lending to individuals or other entities against gold jewellery, are not eligible for classification under agriculture sector, IOB officials say that their bank will redouble efforts to expand their portfolio of loans against gold to farmers.

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