We have already highlighted the importance of gold loans and how it has been instrumental in the growth of the economic elements in the country and has furthered the cause of growing and diversifying the economy. There are certain indicators that point to the fact of how important a gold loan has been in driving the growth.
The indicators which point to the fact that gold loan is very important for the growth and development of a country are multiple in numeric. It is well documented that gold loans can not only fulfil all your economic desires but also it can become an important instrument to leverage the financial credit that is existent in the system and can help in bringing about improvement in the functioning of the economic infrastructure. Many indications help in identifying the fact that the economy is slowly progressing towards a growth-oriented environment and gold loans play a very important role in the growth of credit facilities in the country. Following are some of the most important of those indicators available in the country thereby encouraging the slow growth of this situation-
An increase in the price of gold
This is one of the most important indicators which should be checked out to understand the availability of gold loan facilities. The investment environment in a country and how it has effectively built a model of economic reputation. It firstly functions when you identify the connection between gold loans and the prices of gold. When the prices of gold in the domestic market increase the demand for gold should normally decrease. But since gold is an expensive item and an article that runs on the principle of the Veblen Effect, considered to be an exception to the law of demand, it means that the consequent demand for gold loans increases with the increase in the price of gold.
The borrowers become aware of the fact that the more gold they are capable of keeping as collateral securities, the more they would be able to earn from the deposited gold as loan amount and would further be able to use that gold for any other productive purpose. Thus increase in the prices of gold is an indirect indicator pointing to the fact that the demand for gold loans increases with an increase in the price of gold in the domestic market.
Overall Increase in Banking Facilities
The second indicator pointing to the fact that there is a marked increase in gold loan facilities is the subsequent increase in banking facilities and the number of commercial banks in general. You would be well aware of the system that Canara bank gold loan eligibility keeps gold as reserves and then provision the requisite loan amount according to the specifications mentioned by the borrowers. Thus if there is an overall increase in banking facilities, it means the borrowers would have more opportunity to lend loans from the banking institutions by keeping gold jewellery as collateral securities.
Thus the banking facilities that are found in the economic environment play a very important role in the functioning of the credit system and liquidity mechanism in a country like India where the regulation of financial credit plays a very important role.
Prevailing Low-Interest Rates
The final indicator pointing to the fact that interest rates are an extremely important indicator concerned with the functioning of the gold loan facilities is interest rates. Since the number of collateral securities charged for gold loans, they do not increase the interest rates simultaneously because they know that if they increase the interest rates it will become very difficult for the banking institutions to attract creditors and there will not be adequate provisioning of loan facilities in the country. Thus low-interest rates point to the fact that there is immense growth in the investment environment of a country.
Thus it is very important to understand that gold loans have been growing enormously with growth prospects encouraging more borrowers.
Must Read-Positive Impacts and Economic Indicators encouraging investment growth
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