Dip in Gold Prices Unlikely to Impact NBFC Asset Quality

SEATTLE (Scrap Monster): The most recent report published by Crisil Ratings says that the recent dip in gold prices is unlikely to have significant impacts on the asset quality of non-banking financial companies (NBFCs) that lend money to customers against pledged gold.

There has been a surge in demand for gold loans in the months following the Covid-19 pandemic outbreak. The loan against the yellow metal emerged as the easiest and most convenient manner for small businesses and individuals to meet their financial needs. The lower credit eligibility has made gold loans accessible to all. The growth horizon for gold loan sector looks broad and bright.

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NBFCs provide dedicated services to customers. It is unlike banks, for which gold loans are just one among their portfolio of loan products. Also NBFCs are said to have deeper market penetration, especially in rural areas, where banks lack their presence. The quicker turnaround time and innovative products makes them more competitive than banks. It must be noted that organized loan sector accounts for only 5% of the entire gold loam market in the country.