CHENNAI: While the Reserve Bank of India’s (RBI) draft guidelines on gold loans have faced stiff opposition from a section of political parties and farmers’ associations, the state cooperative department on Thursday clarified that crop loans provided after taking gold as collateral through 4,456 Primary Agriculture Cooperative Credit Societies (PACCS) will continue as usual, since these institutions are not governed by the RBI.
These 4,456 PACCS, which operate through 225 branches and serve 12,620 village panchayats, extend credit to local residents for both agricultural and non-agricultural purposes. For the financial year 2024-25, PACCS disbursed loans amounting to Rs 15,692 crore to 17,37,460 farmers, according to official data shared by the department.
Minister for Cooperation K R Periyakaruppan at the secretariat on Thursday said the PACCS are not regulated by the RBI and therefore are not subject to the proposed gold loan guidelines. “The crop loans issued by PACCS to farmers will continue as usual,” he told the media.
Department officials further clarified that the proposed RBI norm which prohibits banks’ from accepting gold as security for agricultural loans up to Rs 2 lakh also will not be implemented at PACCS.
“Even if the RBI’s draft guidelines are notified for enforcement at a later stage, it won’t be applicable to PACCS. Additionally, other guidelines, including those restricting maximum tenure of gold loans above Rs 2 lakh to 12 months, do not apply to PACCS,” said an official.
According to the RBI guidelines, loans exceeding Rs 2 lakh must be repaid in equated monthly instalments (EMIs) over a 12-month period, covering both principal and interest.
PACCS provide crop loans for a range of crops, determined by the extent of cultivation and the scale of finance approved by the State Level Technical Committee. These loans are offered without collateral for amounts up to Rs 2 lakh and with collateral for amounts up to Rs 3 lakh. Crop loans cover cash and input costs, including fertilisers, pesticides, and seeds.
Currently, 933 branches of 23 central cooperative banks and 55 branches of the Tamil Nadu State Apex Cooperative Bank fall under RBI regulations and should comply with the new gold loan guidelines.
Gold loans account for 65% of total loans issued by cooperative banks, with nearly 60% of those loans being above Rs 2 lakh, as per the official data.