1.

AGRICULTURAL GOLD LOANS

Agricultural Gold loan is one of the ways of extending financial assistance to
farmers for meeting their agricultural expenses. Gold Loans can be granted
against gold ornaments / gold wares only and not against gold bars and gold
coins. It is the most secure loan as per Banks experience and NPA is almost nil /
negligible.
Objective : To extend hassle free finance to farmers / agriculturists against Gold
Ornaments / gold wares to increase their liquidity to meet crop production
expenses, investment expenses related to agriculture and / or allied agricultural
activities.
Eligibility : 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. The applicant should satisfy the KYC
guidelines. Necessary enquires about the applicant pursuing the activity to be
done.
Type of Loan : Agricultural Cash Credit/Over draft
Demand Loan/term loan
Purpose : Agri Gold Loan availed has to be invested by the Borrower either for
meeting crop production expenses and / or for creation of assets to be used in
his farming operation or for allied agricultural activities like Dairy, Poultry,
Fisheries etc.
Quantum of Loan: The amount of loan that can be granted against security of
gold ornaments should not be higher than the advance value of gold ornaments
pledged.
Advance value: This is the price of gold (18,22 & 24 carat purity) advised by
LHO every month less margin.
Margin: 30% on price of gold advised by LHO. In deserving cases BM has
discretion to charge 25% margin.
Interest: Interest should be charged as applicable to agricultural advances.
Processing Fee: As applicable to Agriculture Advances.
Authority: a. Recommending Authority-Cash officer / Special Assistant(cash)
responsible for weight, purity & value of gold ornaments
b. Sanctioning Authority - Branch Manager/Accountant

Documents to be obtained at the time of sanction :

I. DP Note & DP Note take delivery letter
II. Revised Application cum appraisal (SIM-GL/1)
III. Gold ornaments take delivery letter (SIM-GL/2)
IV. Witness letter for illiterate borrowers (SIM-GL/3)
V. Arrangement letter (SIM-GL/4) to be obtained in duplicate and a copy to be
handed over to the borrower.
VI. Two copies of photograph of the borrower
VII. Memorandum in respect of gold ornaments deposited as security(SIM-GL/9)
Repayment :
a. Cash Credit / Overdraft : Like KCC, it is a running account for a period of 3
years, subject to review (outstandings vis--vis advance value of the ornaments
pledged) at annual intervals. It should always be ensured that the
outstanding in the loan account does not exceed the market value of the
ornaments pledged.
b. Demand Loan / Term Loan : The repayment period of the loan should be
fixed so as to coincide with the harvesting and marketing season / generation of
income from the activity, allowing 2 to 3 months time after harvesting to market
the produce and realize the proceeds. However, the total period will not generally
exceed one year from the disbursement of the loan in the case of short-term loan
/ production credit and 36 months in other cases. It should always be ensured
that the outstanding in the loan account does not exceed the market value
of the ornaments pledged, especially when a longer repayment period is
provided. In such an event, the borrower should be advised to repay adequately
to regularize the position.
Discretionary Powers: To be exercised as per Delegation of Powers advised
by the LHO.
Custody of Ornaments : The gold ornaments must be placed in the strong room
under the joint custody of the Branch Manager/Accountant and Cash Officer.
Custody of Loan Document : By cash accountant in a fireproof safe.
Operational Procedure :
Branch functionaries / sanctioning Authority should satisfy themselves by
oral enquiry about the applicant being otherwise eligible.
Photograph of borrower is to be obtained in all cases and affixed to loan
opening form and Gold loan register also.
Due date for repayment / or instalments to coincide with harvesting and
marketing of crops raised.
Valuation of the security i.e. Gold Ornaments is based on weight and
fineness of the gold content.

 Circular instructions are given by the Bank (every month) regarding the
price of gold that can be financed per 10 Gms. based on 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 b. Nitric Acid method c. Specific gravity method
Services of local goldsmith can be used only in exceptional cases for large
advances and his fees paid by debit to branch interest account.
Details of the gold ornaments pledged like description, gross weight, net
weight, valuation rate and advance value are noted in the Gold ornaments
take delivery letter (SIM-GL/2) and is certified by the cash officer.
Gold Loans can be granted to joint borrowers also on E or S, F or S, L or
S and B or S terms.
Gold Loans can be issued to illiterate borrowers also after explaining them
about the implications of the loan and the various documents obtained.
On written request of the borrower(s), part delivery of ornaments may be
given against part repayment of the loan, provided the advance value of
the ornaments still in the Banks possession fully cover the outstanding in
the account. The borrowers acknowledgement for receipt of ornaments
delivered to him / them should be obtained in the Gold Loan Register, in
all cases.
Under similar terms and conditions advance may be granted against
pledge of silver ornaments/silver ware also.
Loans granted against gold & silver ornaments are not to be taken in to
account for computation of DCB register.
Calling up of advance : Advance will be called up, when (i) the value of the gold
is less than the outstandings or (ii) the account becomes NPA. If the account
is irregular, a letter should be sent to the borrower requesting him/her to
deposit the amount / regularize the account. If the borrower fails to regularise
the account and it continues to be irregular, a notice should be sent advising
that the ornaments will be sold by public auction, if the loan and interest are
not paid within 30 days from the date of notice. This notice must be
despatched to the borrower under Registered Post with acknowledgement
due. Whenever any of the notices described above is sent, the date of
despatch should be noted in the respective account of Gold Loan register
under the initials of the official signing the notice.
Sale of Gold Ornaments : When an advance has been called up and repayment
is still not forthcoming, the Bank has the right to sell the gold ornaments pledged,
after giving reasonable notice to the Borrowers (vide section 176 of the Indian
Contract Act). If the account is not put in order within the time stated in the notice,
the ornaments should be put up for auction with the prior approval of the
Controlling Authority.

SIM-GL /1
APPLICATION CUM
ORNAMENTS

APPRAISAL

FOR

LOANS

AGAINST

GOLD

SILVER

The Branch Manager

Signed Photograph of the
Applicant
State Bank of India

Signed Photograph of the

Co-Applicant

_________________________________
(Signature of the introducer)
Name
:
A/c No. :

Dear Sir,

SANCTION OF LOAN AGAINST GOLD / SILVER ORNAMENTS

I propose to take up the following agriculture/allied activities and
request you to sanction me an Agriculture Cash Credit / Demand Loan /
Term Loan amount of Rs.
(Rupees
Only) against the pledge of gold /silver ornaments. My particulars are
furnished below:
Details of Activity(ies)
:
1. Name

2. Address

: ___________________________
___________________________
______________PIN_________
Ph.No.
3. Date of Birth
:
4. Particulars of ID Proof :
(for new customers only)
5. I certify that the above particulars are correct.
Place :
Date :
APPRAISAL & SANCTION

Signature of the Applicant

FOR OFFICE USE ONLY

Account No.
1.
2.
3.
4.

Loan Amount
: Rs.
Interest Rate
:
Repayment
:
Processing charges :
Appraised
Control
Branch :
Date
:
Cash Officer

Sanctioned

Sanctioning Authority

SIM GL /2
Gold / Silver Ornaments Take Delivery Letter

The Branch Manager

State Bank of India
___________
Dear Sir,
Loan against security of gold / silver ornaments
Please take delivery of the following gold /silver ornaments by way of
pledge and grant me / us agriculture gold loan (demand loan / cash
credit / term loan) of Rs.________ against security thereof.
Description of Ornaments
________________________
________________________
________________________

Gross Weight in gm
_____________
_____________
_____________

No. of ornaments :
Total Gross Weight :
I/we certify that all above gold / silver ornament(s) are my/our bonafide
property and no other person has any claim against them.
On payment of all dues of the Bank, please deliver the ornaments to
__________________ (to be specified only in case of Joint accounts with a
suitable option, viz. either / both of us or survivor, former or survivor, etc.)
The security created hereinabove is intended to and shall operate as a
continuing security for all loans, indebtedness and liabilities of the
borrower(s) to the Bank at all times during the subsistence of loan(s)
notwithstanding
a. The existence of the cash credit balance or NIL balance in the loan
accounts at any time or any partial payment of fluctuation of accounts
or
b. Any loans or any part thereof have been repaid either after demand
has been made by the bank or otherwise or has been repaid on
demand.
Yours faithfully
Signature(s) of borrower(s) :
Date :
----------------------------------------------------------------------------------------------FOR OFFICE USE
Net Weight
Advance Value
Total Advance
Loan Amount
(in Gms)
(per gram)
Value (Rs.)
(Rs.)
(A)
(B)
(C) = (A x B)
(D)
___________

____________________________

_____________

Certified that the gross and net weight of gold / silver ornaments, their
valuation rate and advance value as given above have been verified by
me and are correct.
Date :

Cash Officer

SIM GL /4
ARRANGEMENT LETTER

To,
Shri/Smt./Kum
___________________
Dear Sir,
Gold Loan
Demand Loan / Agri Cash Credit / Agri Term Loan of Rs._____________
With reference to your application dated __________, we hereby sanction you a
demand Loan / ACC / ATL of Rs.________ (Rupees _________________ only) on
the following terms and conditions:
1.
Purpose: The loan is sanctioned to you as per your application
dated__________.
2. Rate of Interest
: ______% p.a. above / below SBAR with a
minimum of _____% p.a.
In the event of a default in payment or any irregularity in account, the
Bank reserves the right to levy a higher rate of interest, as it deems fit
with monthly / quarterly / half yearly / yearly rests. The rate of interest is
subject to revision from time to time and you shall be deemed to have
notice of changes in the rate of interest whenever the changes in SBAR
rate displayed/notified at/by the branch / published in newspapers / made
through entry of interest charged in the passbook / statement of account
sent to you etc.
3. Repayment *: a. Cash Credit accounts : The facility is a running
account and the sanction is valid for three years, subject to review
every year to determine satisfactory conduct of account.
b.Demand Loans : Payable on demand. The entire loan along with
interest is to be repaid on __________________(date).
c. Term Loan : The loan amount along with interest is repayable
in_____________(number of instalments) monthly / quarterly / half-yearly /
yearly instalment of Rs._____________and a final instalment of
Rs.____________.
(* Strike out whichever is not applicable)
4. Processing Charges:
Processing charges of Rs._________ are payable immediately, which will be
debited to the account.
5. In the event of failure to pay any single instalment, bank is entitled to
call up the full loan amount due with interest.
6. Please call on us on any working day to execute the documents. The
loan is also subject to other terms and conditions as mentioned in the
document (s) executed / to be executed in connection with the loan
and as may be prescribed by the Bank from time to time. The duplicate
copy of this arrangement letter may please be returned to us duly
signed by you s) within a period of 45 days from the date of this letter
in token of acceptance of the terms and conditions detailed herein.
Yours faithfully
Branch Manger
Received the original.
Terms and conditions accepted Signature(s) of Borrower(s)
Date:

SIM GL /9
STATE BANK OF INDIA
Memorandum in respect of Gold / Silver Ornament(s) deposited as
security
Date:
Gold Loan Account No.
Gold Loan Register Folio No.
The under noted gold / silver ornament (s) have been deposited with
us as security against the loan of Rs.________ (Rupees
__________________________
only)
advanced
on
__________
to
Shri/Smt.____________________.
Particulars
--------------------------------------------------------------------------------------------------S.No.
Description
Gross Weight in Grams
Initials
---------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------Total
--------------------------------------------------------------------------------------------------Branch / Divisional Manager
Note : To be prepared in duplicate. One copy is to be placed in the Gold loan bag and
the other is to be given as acknowledgement to the borrower.