Even before the gold monetisation scheme gets rolled out, Federal Bank has offered its consumers an attractive ‘Apna Gold Loan’ facility.

Unlike the gold deposit scheme unveiled in the Budget, Federal Bank does not melt the jewellery or gold deposited with it. Customers can deposit gold coins (up to 50 gm) and jewellery with the bank, just like putting it in a bank locker. The advantage in this case is that the bank locker comes practically free of cost.

Once the gold jewellery is deposited, Federal Bank will appraise it and give a list of inventory. The bank will sanction an overdraft in the savings account of the customer equivalent to 75 per cent of the value of gold deposited. If a customer uses the overdraft then he has to repay it within one year and pay interest only for the period the money is used. The lending rate on Apna Gold loan is 12-14 per cent a year against 32 per cent charged on credit card cash withdrawals.

Speaking to BusinessLine , KA Babu, Head (Retail Business), Federal Bank, said the innovative product seeks to attract youngsters and erase the stigma associated with gold loan as the last resort for any emergency. “Why should not somebody advance their holiday by two months by availing our gold loan? One can even apply for an IPO (initial public offering) using the overdraft and repay it in 20-25 days,” he said.

With growing demand and a long waiting list, finding a bank locker has become a difficult task. For one, it depends on the number of years a customer is associated with a bank. This apart, banks charge an annual fee of ₹1,500 to ₹2,000 and demand a fixed deposit of ₹25,000-50,000 in most cases.

Federal Bank offers the Apna Gold loan across its 1,200 branches and intends to focus on Maharashtra, Gujarat, Tamil Nadu, Karnataka and Punjab. The bank advances stand at ₹5,000 crore, of which gold loan accounts for 13 per cent. Of the total gold loan, Apna Gold loan adds up to 5 per cent, he said.

On the challenges faced in lending against gold, Babu said there is a dearth of qualified appraisers and an industry body should take the responsibility of empanelling appraisers for banks to rely on.

In many cases, he said, customers availing gold loan do not want their information to be shared with the Credit Information Bureau (Cibil) or other credit rating agency while the law makes it mandatory to share these data.

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