New Delhi : The agricultural gold loan scheme of State Bank of India (SBI), which it provides loans up to Rs.3 lakh at low interest rates to farmers, agriculturists etc. has recorded an increase of Rs. 409 crore during April - September in this fiscal year. The salient feature of this gold loan scheme is that loans are also to those farmers or persons engaged in cultivation, who don't even have land in their name. During the first six months of this fiscal year the agricultural gold loan scheme was able to disburse loans worth Rs. 2,279 crore.

Usually the gold loan offered by banks are in the form of a demand loan where a farmer pledges his gold for a loan and when he repays the loan, the gold is returned to the farmer. For a fresh sanction of any loan he has to redeposit the gold, obtain fresh sanction and has to undergo the same formalities again. However, with the new SBI agricultural loan scheme, all this has changed.

Agricultural gold loan scheme of SBI,  reduces the risk of carrying gold from the village to bank every year and provides a running cash credit account for the farmer. Farmers are also able to save money on interest rates because they are able to deposit and withdraw funds as they need from their loan account. The gold thus acts as a safe deposit with the bank and does away with the need of repeated sanctions from the bank authorities.

The agricultural gold loan scheme offered to farmers by SBI has one of the lowest rates of interest for this segment. While other banks and non-banking finance companies (NBFC's) charge Rs, 3-5 per Rs. 100 of loan, SBI charges just 57 paise per Rs. 100 as the interest rates. This agriculture gold loan also saves the farmers from greedy moneylenders who blatantly charge whopping interest rates.

This modified agriculture gold loan scheme has shown great response in southern parts of India, especially in Andhra Pradesh, Tamil Nadu, Kerala and Karnataka. SBI expects this agriculture gold loan scheme to pick up in the northern and central parts of the country with the next Kharif season. The loan accounts with SBI under the agricultural loan scheme during April-September have increased from 119,000 to 757,642.