NEW DELHI: Subhash Gupta used to work in a private company when the lockdown started and he wasn’t paid for the next two months. While he was able to mobilise his savings to pay for his children’s school fees, house rent and monthly expenses, his last resort to fulfill existing obligations was to request a personal loan.But, with banks finally turning leery on extending personal credit, Gupta took his only remaining option: mortgaging household gold.
“I approached many banks for a personal loan, but with no salary slip for the last three months and Rs 5,000 balance, they were reluctant. But, it took me just two days to get an instant gold loan. It was a major relief, “ he said.
He is just one among the thousands of cash-strapped individuals who are beginning to mortgage gold to make ends meet, a reason why gold finance companies like Muthoot Gold continue to do brisk business.
According to George Alexander Muthoot, MD, Muthoot Finance, the company expects its gold loan business to rise up to 15 per cent this financial year. “Gold loans are the easiest and quickest loan to avail for working capital requirements. Seventy-five-per cent of our customers are small shopkeepers, traders and small businessmen,” Muthoot told media.
Even traditional banks, with all their focus on MSMEs and now highly risk averse towards individual lenders, are not shying away from extending gold loans. Many, in fact, are offering highly diversified gold loan options and competitive interest rates.
The loans are available for tenures from three months to 24 months and start at as low as Rs 10,000 in rural regions and Rs 25,000 in urban areas.
Even public sector lender State Bank of India is currently offering gold loans up to Rs 20 lakh and sources in some branches claim that gold loan demand has gone up by 25 per cent, primarily in rural areas.
“Borrower profiles include mid-size farmers, small shopkeepers, dealers,” a senior SBI official said on condition of anonymity. With overall household finances expected to worsen, experts expect gold loan demand to continue rising even as overall lending growth is expected to hit a multi-decade low of 0 to 1 per cent, according to credit rating agency Crisil.
The World Gold Council believes that the trend of increasing demand for gold loans will only continue. According Somasundaram PR, head of the WGC’s Indian operations, since traditional banks are likely to exhibit greater risk aversion in the current context, gold loans provide a convenient route for mobilising money quickly