Bengaluru-headquartered Canara Bank has set up 500 jewel loan shops in its branches to expand its gold loan business which has touched Rs 1.3 lakh crore, as of 30 June 2023.

Besides, the state-owned bank has around 1,600 branches where separate counters have been created to cater to the rising demand for gold loans, particularly in South India which has households with high gold holdings.

“About 80% of our Rs 1.3 lakh gold loan business comes from South India. Gold loans in North India is minimal and will take time to pick up but we are seeing growth from there as well,” said Canara Bank managing director and CEO K Satyanarayana Raju.

The bank has opened 6,000 out of its 9,200 retail branches for gold lending. “We have doubled the network for providing gold loans from 3,000 to 6,000 branches within three years,” said Raju.

The focus on gold loans enables the bank to meet rising demand from customers and also to capitalise on higher yields. “The average yield on our gold loan portfolio is around 8.80%,” said Raju.

The 500 jewel loan shops are created within the bank’s branches and are equipped with staff and machinery. They are given quality testing machines and the staff exclusively deliver gold loan products. “That helps us to speed up the process. A customer raises a loan against gold only in an emergency,” Raju said.

The bank has provided for exclusive gold loan counters in almost 1,600 branches to promptly address the request of customers. 

Around 85% of the bank’s gold loan book is towards agriculture lending. This is because Canara Bank has 60% of its branches in rural and semi-urban areas. “In the urban and metropolitan areas, the bank’s gold loan composition is comparatively less,” Raju told analysts after announcing the fiscal first quarter results.

In the quarter ended June 2023, Canara Bank’s growth in lending to retail, agriculture and MSME (RAM) was led by gold loans. While RAM credit grew 12.89% year-on-year to Rs 4,91,475 crore, the gold loan portfolio rose 29.37% to Rs 1,29,800 crore. The MSME segment grew 4.44% to Rs 1,26,421 crore.

The retail credit of the bank grew 10.64% YoY to Rs 1,42,297 crore in the June 2023 quarter. Within this, housing loans, which is the major component, grew 13.64% YoY to Rs 85,884 crore. 

Corporate loans rose 13.75% YoY to Rs 3,96,196 crore in the quarter ended June 2023.

The bank’s gross advances rose 13.27% YoY to Rs 8,87,671 crore in the quarter ended June 2023.

Canara Bank posted a 74.83% rise in net profit to Rs 3,535 crore for the April-June quarter from Rs 2,022 crore a year ago.