To go gross or net? That is the question weighing on TN’s jewellery loan waiver plans

If gross weight is considered in identifying eligible customers for a gold jewellery loan waiver, many genuinely poor people will be deprived of the benefit since the waiver is offered only on gold jewellery below five sovereigns.

This is because co-operative banks, more often than not, do not sanction the full loan amount according to the gross weight of the mortgaged gold jewellery. The banks sanction the loan amount after providing for a certain discount on the gross weight. In the case of certain ornaments, such as necklaces, the gross weight is discounted further.

Thus, a customer’s loan will be sanctioned only on the net weight of the gold jewellery. “This has been the normal practice while sanctioning loans against gold jewellery,” said T Sadagopan, a consumer activist.

A cross-section of customers that Moneycontrol spoke to felt that the gross weight measure would make many ineligible for loan waivers as their loans were extended on the basis of net weight though they had mortgaged much more in terms of gross weight.

Due diligence

A top Tamil Nadu State Co-Operative Bank (TNSC) official, who declined to be named, told Moneycontrol that the State Government had made elaborate efforts to ensure that the loan waiver benefited the poor and was not misused by others. The weeding-out exercise saw the government rely on Aadhaar cards, ration cards, work certification and so on to avoid multiple claims by a single family and identify genuine clients.

Government sources estimate that the waiver proposal, after the weeding-out exercise, would benefit 11 lakh customers. If the net weight measure is adopted, it would benefit another 50,000 genuine customers, Sadagopan said. “These are really poor people. And, they are expecting the government to consider net weight,” he said.

“If gross weight is taken as the measure, many will not be eligible for the loan waiver,” Sadagopan added. The ambiguity on the weight (net or gross) for the gold jewellery loan waiver must be cleared, he added.