THIRUVANANTHAPURAM: Four days ago, Siby Paulose received a call from a private finance firm where she had pawned her gold. She couldn’t repay the loan amount and the company is now threatening to auction off her gold. She pawned it during the first wave of Covid.
Siby is the sole breadwinner of her family after her husband lost his job due to the pandemic. She has multiple gold loans, all she took to get through the crisis. “It was shocking. That gold was our life’s savings. I pawned it as last resort. When pandemic has made daily life hard, I couldn’t imagine having to pay off the loans,” says Siby, a native of Piravom. She has now four days to pay the interest and renew the loan, and if she doesn’t, her gold will be auctioned off.
Siby’s is not an isolated incident. She represents a big majority of common people who were gravely hit by the Covid-induced economic crisis. The vast advertisements announcing the auction of gold jewellery by Non-Banking Financial Companies show the gravity of the financial crunch in many households.
Household crisis
In Kerala, gold represents prosperity. Letting go of it is the last resort for many. Siby suggests the need for immediate intervention by the government to extend the loan repayment time. “People are unable to repay interest because they are unable to go out and work due to the pandemic. People deserve some help,” says Siby who has been involved in social work for the past 21 years.
Apart from daily wage earners, small-time entrepreneurs and traders are also in deep crisis, says S S Manoj, state secretary of Kerala Vyapari Vyavasayi Ekopana Samith. “Gold and property are two assets that traders use to get loans when in distress. With the pandemic, none has been able to go to work. The market has been shut for over 15 months and though we worked for a month in between, it didn’t make things better,” says Manoj.
Organised looting?
Consumer rights activist Dijo Kappen claims the recent gold loan crisis is a form of organised looting. With nationalised banks not giving out enough gold loans and limited bank timings, people are rushing to private financial institutions to pawn their gold. “Whatever gold is being auctioned off is bought by private financial firms and they get a profit. The government has to come up with a way to control this. It should issue directives to extend the period for interest payment,” he said.
Express bank loans
Rajan P S, CEO of Kerala Bank said his organisation provides Express Gold Loans at interest rates much lower than the private financial firms. “At our bank, the gold loan is being given swiftly and at lower rates. They have one year to repay it and we very rarely conduct auctions. Most people rely on private financial firms in an attempt to get loans quicker, and this is how they end up losing their assets when they cannot repay the hefty interest,” says Rajan, insisting the public should rely on national banks more.