Short on cash, rich in gold? Here’s how a gold loan can put more money in your pocket

livemint.com:

loan-to-value (LTV) for gold has increased by nearly 20% in the last one year. Gold LTV, which was hovering around ₹4170 per gram during the last week of May, has zoomed to about ₹5000 per gram now, data with the Association of Gold Loan Companies (AGLOC) India showed.Simply put, a sovereign of 22-carat gold (8 grams) would get you a loan amount of about ₹40000 now compared to around ₹33300 a year ago.

AGLOC represents leading gold loan NBFCs (non-banking finance companies) such as Muthoot Finance and Manappuram Finance.Banks and NBFCs offer loans for up to 75% of the prevailing value of gold, which is referred to as LTV. The rate of interest and the methodology followed in calculating the eligible amount for the loan differs among banks.Domestic gold prices increased about 15% during fiscal 2024 and touched ₹67000 per 10 grams at the end of March 2024.

The yellow metal moved up to about ₹73000 during April as it retained its shine as it was seen as one of the safer investment options by various central banks across the world and consumers amid geopolitical uncertainties. Growth for gold loan NBFCs, which account for about 60% of the market, has also seen a sharp uptick due to the spurt in the prices of the precious metal.Muthoot Finance, the gold loan NBFC, reported the highest ever gold loan advances in the first nine months of a year in fiscal 2024 at ₹120856 crore and the highest ever disbursals to new customers at ₹11920 crore for the timeframe.Gold loan AUM (assets under management) grew 7.3% year-on-year to ₹83700 crore in fiscal 2024 for Manappuram Finance.

“Share of gold loans in the AUM will improve. Judging from the current trends, the gold loan growth will be better than last year," analysts at Motilal Oswal