ADAG co forays into loan against gold biz

Reliance Commercial Finance, an Anil Ambani group company, on Monday forayed into the business of providing loans against gold units -- a first-in-industry offering where gold in paper form can be used as collateral.

The company will provide loans up to Rs 1 crore (Rs 10 million) under this programme, for which it has entered into an exclusive tie-up with another group firm, Reliance Mutual Fund.

Initially, these loans would be available to investors in Reliance MF's Reliance Gold Savings Fund, Reliance Commercial Finance chief executive officer K V Srinivasan said.

The company would be offering loans up to 90 per cent of the value of Reliance Gold Savings Fund units held by the investor.

The minimum loan offered under this initiative would be Rs 1,00,000 and the maximum would be Rs 1 crore (Rs 10 million).

The tenure of the loans will vary from six months to 12

months.

Unlike loans against gold in physical form, the new initiative would not require the lender to go through procedures like assessing the quantity, purity and price of the gold, the company said.

Reliance Commercial Finance already provides loans against gold in physical form and expects its overall book size to grow manifold in the next few years on gold loans, Srinivasan added.

The company had a loan book size of Rs 10,686 crore (Rs 106.86 billion), with a customer base of over 1,15,000 customers, as on December 31, 2010.