Gold price: Gold loan market is growing rapidly, reaching Rs 4.6 lakh crore in FY22

Calcutta: Dozens of Indians are using their gold holdings as collateral to meet their financial needs, profiting from rising gold prices amid pandemic and economic recession, and aided by network expansion branch offices and greater use of technology by non-bank gold lending providers.

The trend is expected to continue and help the organized gold lending market grow 15.7% per annum to reach $ 62.8 billion, or roughly Rs.461,700 crore, in 2021-2022 from $ 47 billion. dollars, or Rs.344,800 crore, in 2019-20, according to a report released Tuesday by the World Gold Council.

The report, “Gold Loans Help India Weather Storm Covid-19,” said a 28.8% rise in the price of domestic gold this year and the need for rapid credit among small businesses would stimulate the growth of gold lending.

Many banks and non-bank institutions target this product segment because of its acceptable risk profile.

While unorganized lending has always coexisted with the gold markets in India, over the past decade several established banks and non-bank financial companies have entered the segment and made institutionalized gold lending ubiquitous.

Somasundaram PR, Managing Director, India, World Gold Council, said the recent surge in demand for gold lending through banks and NBFCs started in July 2019 when the prices of the yellow metal started to rise. strongly, although the Covid-19 outbreak has given it an extra boost.

Muthoot Finance and

, two of the country’s leading NBFCs focused on gold lending, expect their gold lending assets under management (AUM) to grow 15-20% in the current fiscal year, according to the WGC report.

The 28.8% rise in the price of domestic gold so far this year has resulted in increased demand for gold lending. Borrowers benefited from a higher loan value for the same collateral, while lenders benefited from lower loan-to-value ratios (LTVs) on their existing loans and higher demand.

With a higher price of gold and greater liquidity needs amid the pandemic blues, it is believed that Covid-19 would induce greater recycling of gold among consumers. However, most people use their gold holdings as collateral to secure their financing needs rather than outright selling. In addition, the rural economy has performed well this year, reducing the need for distress selling.

Technology is seen as a key factor in the growth of the gold lending market. Some gold lending NBFCS have adopted a well-received online gold lending program.

More can be done in this area with the launch of stand-alone kiosks and gold valuation machines in branches and public places, the use of e-KYC, and the ability to cash out and pay back. loans through electronic wallets and prepaid cards, experts said.

Gold is a preferred saving for Indian households. It ensures preservation of capital, liquidity and source of funding during tough times, supporting gold’s relevance as a strategic asset.

Priscilla C. Carnegie