To disabuse the middle class of the notion of stigma attached to taking gold loans and get them to make productive use of their gold jewellery, Kerala-based CSB Bank is planning to introduce a product whereby they can place their jewellery in its ‘custody’ and avail an overdraft.

If these customers are reluctant to visit its branches, the Thrissur-headquartered bank will also ensure that all formalities relating to custody of their jewellery, crediting of the loan amount to their account and pick up of the jewellery happen in one go at their premises via a tie-up with a fintech company.

By doing so, the private sector bank, formerly known as The Catholic Syrian Bank, wants to expand its customer base for gold loans, which are usually taken by the lower middle class. The middle class is inclined to stash away its jewellery in lockers.

Gold loan advances constituted 33 per cent of its total advances and is a mainstay product for the Bank on the retail advances side. The Bank wants to increase the proportion of such advances to 35 per cent.

CVR Rajendran, MD & CEO, said: “Today, gold loans is confined to the lower middle class people. Middle class people are shy of taking a gold loan even though they have gold. We have a stigma attached to pledging of gold. This is not considered as a respectable activity.”

However, people don’t hesitate to borrow on a credit card at 28 per cent or unsecured loan at 40 per cent because it is not known to others, he added

Pledging gold

Rajendran elaborated “When you pledge gold it is known to others. That seems to be the problem. That is why the banks are not popular when it comes to gold loans.

"When you go to a bank for taking gold loan, there are other customers. This is one of the products that the bank is selling and there are various customers coming in.”

This issue set the bank management thinking on how to maintain secrecy for customers wanting to take gold loans.

The CSB chief noted “That is why gold loan companies are located on first floor, second floor (of a building) where the visibility is less. You are not seen as taking a gold loan. You don’t want to be seen as taking a gold loan.

“All of us have gold jewellery but we hardly put them to use. It is all put away in the locker. Today, instead of doing that you can handover the jewellery to us for safe custody. It will be a honourable activity for you. You will not be hounded for that.”

Once the jewellery is handed over to CSB’s branch, it gives the customer an acknowledgement stating the jewellery pieces deposited with them and their value.

“We will charge the customer one per cent of the jewellery value as custodial charges. We will give you limit on it also.

“So, in your savings bank account we will give you an overdraft limit or give you a pre-loaded card. If you use the limit, you pay for it. If you don’t use the limit, you only need to pay the custodial charges,” explained Rajendran.

He opined that the custody of gold with a bank is much more safer than in the locker. Industry players say when a bank takes a customer’s jewellery in its custody, the onus for their safekeeping is on it. In the case of locker, the bank does not know what the customer has kept inside it.

If a customer wants the bank to return the jewellery placed in its custody, there will be a minimum charge -- about Rs 50-Rs 100.

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