Shripad Jadhav, Business head, retail agriculture and gold loans, Kotak Mahindra Bank
Agriculture gold loans are witnessing a growth of above 40 per cent currently, with more farmers turning to them. It has become one of the ways to get credit faster with the surge in yellow metal’s value aiding the trend, said Shripad Jadhav, Business head, retail agriculture and gold loans, Kotak Mahindra Bank. “Because the value of the commodity (gold) has gone up, availing of gold loans has also gone up. Earlier, what people used to get ₹40,000-50,000, now they are able to get ₹1-2 lakh. Hence, they are pledging gold,” said Jadhav in an online interaction with businessline.While the total lending in the industry is around ₹316 lakh crore, agri-gold loan is about ₹4.5-5 lakh crore. A majority of the agri-gold loans are with the banks, either private or nationalised banks. RBI clarity helpingThe Reserve Bank of India (RBI) has come up with a lot of clarity in its circular for agri-gold loans, which came into force from April 1. Earlier, farmers had to mortgage their agricultural land to avail of crop loans. There are quite a few benefits to availing agriculture gold loans. First, the processing time is low, with the farmer depositing the gold and getting the credit immediately. Also, this does not need documentation and other cumbersome procedures.The RBI’s focus on agricultural credit is especially on small and marginal farmers. These farmers have difficulty in mortgaging their lands because they are small land parcels, and are of multiple ownerships. There are a lot of legal issues in the land mortgage, and there is shared cropping and common tenancy. “These issues don’t crop up in gold loans,” said Jadhav. Gold is held as reserves in rural areas in a large way. The yellow metal is the best option for farmers to get credit from organised lenders, he said, adding that the interest rates are lower at 9-11 per cent per annum, while repayment terms are in line with agricultural loans. Digitalisation easing processThis has been taking place over the past 2-3 years. “This is augmented by the availability of lenders because a majority of the banks have started doing this, and they are aggressively promoting it, said the Kotak Mahindra Bank official.Digitalisation of the process has made things easy for farmers to take loans for agricultural purposes, he said, adding that the RBI has been pushing this over the past 2 years. It has regularly come out with circulars to protect consumers.“This started with COVID, when the RBI increased the loan-to-value (LTV) from 75 per cent to 90 per cent. This is particularly valid for investment purposes, and agriculture is part of investments,” said Jadhav, adding that there is no margin monitoring for this. Increasing ticket sizeThis has resulted in the LTV ticket size increasing from ₹50,000-60,000 to ₹2-2.5 lakh, leading to customer and value growth, he said. The demand for agricultural loans has particularly picked up since 2024, from when gold prices begin to soar. Stating that credit has been a barrier for small and marginal farmers, the bank official said agricultural gold loan has helped farmers leverage with the precious metal, including ancestral, at home. This is helping them to buy implements or equipment or prepare their lands and purchasing to rent tractor or harvested. With farmers being able to buy implements or equipment, they are looking for more work to reap higher profits. “When profits rise, they apply again to increase their landholdings or take more land on lease,” he said, adding that rural areas account for 65 per cent of the gold loans in the country. Growing across nationEarlier, the gold loan industry was confined to the south, but now it is growing at a faster pace in the northern and western parts. “Earlier, gold was carrying a stigma as one for emergency loans. That stigma is going off now from consumers’ minds,” said Jadhav.With norms tightening for unsecured credits, many marginal and small medium enterprises (MSMEs) and shopkeepers are shifting to flexible offerings in gold, where they have the option of only paying the interest.Banks such as Kotak Mahindra have come up with special products for MSMEs. On repayments by farmers, the bank official said they don’t want to lose an object with which they have an affinity. “They are putting in all effort to repay. The repayment options are easy for them,” he said, adding that in contrast, the micro-finance has witnessed a de-growth.On similar options for silver and platinum, he said the problem will be keeping the precious metals in lockers. There could a limitation for this, Jadhav said, adding that farmers are yet to look at silver as an investment option. Published on May 22, 2026
