Rush for gold cash amid need for cold cash
Gold loan companies are seeing a surge in demand from semiurban and rural areas ahead of the festive season, with small businesses and individuals monetising their holdings to raise funds amid a general credit crunch. The recent rally in gold prices following the developments in West Asia has also made such loans attractive by raising eligibility.
“There is completely no fear of Covid in this year’s festive season.
So, people want to splurge,” said Thomas John Muthoot, chairman and managing director, Muthoot Fincorp. Gold prices shot up by 4% last week due to escalating geopolitical tensions and improved safehaven demand.
Currently, 24-carat gold is about Rs 59,100 per 10 gm, 18% higher than Rs 50,060 a year ago.
“We are anticipating pent-up demand for gold loans at least 20% more than last year’s festive season. Whenever the gold price increases, there has always been a positive impact on the gold loan business,” said Umesh Mohanan, executive director and chief executive of Indel Money.
The erratic monsoon in some parts of the country may have also dented rural incomes, forcing people to borrow against their gold.
Data from the Reserve Bank of India (RBI) show outstanding gold loans at Rs 95,476 crore as on July 28, up 23.1% from a year earlier, a sharp acceleration from the single-digit growth in the preceding 12 months. Earlier this month, RBI doubled the limit on gold loans under the bullet repayment scheme — from Rs 2 lakh to Rs 4 lakh — for urban cooperative banks, subject to conditions.
