To ensure purity of gold pledged with it by borrowers, Mangalore-headquartered Corporation Bank is experimenting with caratometers at some of its branches.

With its gold loan portfolio jumping by almost 70 per cent jump in FY13 to about Rs 4,000 crore, the public sector bank is testing viability of the caratometer as a risk-mitigation tool, aimed at breaking the borrower-assayer (usually a local jeweller) nexus.

The caratometer, which is a scientific and non-destructive method of testing the purity of the precious metal, could be used for a confirmatory test (after the assayer gives his report on the quality of gold), thereby ensuring the purity of gold pledged with the bank by borrowers, said a senior official.

“If we are satisfied with the caratometers, which have been procured from a couple of vendors, then we could install them in the branches where the loan against gold business is high,” said a senior official.

Corporation Bank’s gold loan portfolio more than doubled to Rs 3,662 crore as of December-end 2012, against Rs 1,585 crore as at December-end 2011. In the first nine months of the current financial year, the bank’s gold loan portfolio swelled 70 per cent (or by Rs 1,546 crore).

For agriculture loans against gold, the bank charges 10.60 per cent interest for loans up to 12 months and 11.10 per cent for loans of 12-24 months.

For non-agriculture loans against the pledge of gold, the bank charges 11.60 per cent for loans up to Rs 2 lakh and 12.60 per cent for above Rs 2 lakh.

To further boost agriculture lending, the bank has opened ‘gold loan shoppe’ at seven places. The shoppe is an exclusive gold loan counter within the branch to provide quick and fast clearance of gold loans to customers against gold ornaments.

> Ramkumar.k@thehindu.co.in

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