Once again, the rise of gold loans

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- Challenges on the liquidity front will intensify in the near future and gold lending will increase when credit is tightened.

Mumbai, Ta. 30 April 2020, Thursday

High gold prices and lockdowns have led to a slump in lending to financial lenders, which has led to a surge in gold loans.

According to money lenders, a major shift in the finance front amid a nationwide lockdown has once again led to an increase in gold loans secured by gold jewelery compared to retail loan products. Due to the rising price of gold, borrowers get higher loan amounts. So people prefer gold loans over other loans. Gold loan is a hot favorite financial product for both creditors and needy people in adverse circumstances. For creditors this is a safe asset that increases income and profits and it does not matter if the risk profile of the borrower deteriorates as income declines. There is a safer option for the borrower to meet his short-term financial needs. Given this theory, the demand for gold loans is likely to increase even after the lockdown.

The World Gold Council estimates that Indian households have assets of 3,000 to 5,000 tonnes of gold. Rural India has about 4% gold stock. People in rural areas mainly prefer six-month gold loans to meet short-term needs.

According to the Reserve Bank of India, non-food bank loans stood at Rs. 4.5 crore shrunk to Rs. 10.3 lakh crore. In the near future, challenges on the liquidity front will intensify and gold lending will increase as lending shrinks further, the sources said.

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