Gold loan market

According to some recent news came in the media that three gold loan companies are holding nearly 48% gold ornaments according to gold reserve data as they are pledged by lenders to the companies. In any branch office of these gold loan companies they never use a Karat meter, so neither the companies nor the customers know what is the correct karat to lend the loan. Companies say that their LTV is a maximum of 75% and they fix their gold loan per gram. 

15 years ago Hallmark was not introduced in the Indian gold market. So most of the old gold contains impurity. Also, India is a country that is the largest importer of gold. Every year, around 700-800 tones of gold is imported by India. Indian households are the largest holders of gold. 

Wondering how this yellow metal and the economy of India are interlinked? This pandemic situation left nothing in the hands of many households of the country. Many people of the country are forced to take loans to meet their different types of requirements. 

After this pandemic gold loan market is emerging as a very popular market among lenders as well as borrowers. To meet emergency requirements people are applying for gold loans. Because unlike any other loan gold loans do not take much time to get approved. Gold loans come with many advantages like minimum documentation, least time of approval, no processing fees, less rate of interest, etc. Gold loans are an easier option for lenders as well because unlike personal loans. In case of gold loans, the borrower pledges their gold as collateral.

So if the borrower will become unable to repay the loan then the lender institution will become able to sell the borrower’s gold. So, that is why when most of the industries are getting impacted negatively. In contrast, gold loan markets are expected to grow in the fiscal year 2021. Muthoot Finance Gold Loans, SBI, ICICI gold loans, etc. are expecting to grow 15-20% more in the upcoming year. And the gold loan market has earned around 50-60% profit in its first quarter. 

Some of the factors that have helped the gold loan market to grow were, increase in gold loan prices and the relaxation terms related to gold loans introduced by RBI. According to the new policy issued by RBI, Loan-to-Value requirements by 75%-90%. According to this policy, if gold pledged of INR 100 then the person is able to claim the loan of INR 90. The loan earlier was INR 75. 

According to the current market situation, it is anticipated that the gold loan market will emerge more and more. As of right now the industrial sector is facing many types of hurdles.