High Gold Prices to Spur Demand for Gold Loans

SEATTLE (Scrap Monster):  The lending of money against gold as collateral is likely to flourish in India, as banks are seen becoming more and more reluctant to lend to its customers. The high gold prices are likely to spur the demand for gold loans.

The non-banking financial institutions that lend money against gold are slowly resuming normal operations in certain parts of the country following lifting of lockdown restrictions. There has been a significant increase in footfalls at various branches. The gold loans could play a major role in bringing in more purchasing power to people. The trade expects tremendous uptick in demand by end of the current month.

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A normal annual growth rate of 15-20% is projected for gold loan business in India during the current year. The trade expects additional growth in demand in the event of denial of loan by banks.

Recently, the businesses have introduced digital channels that enable customers to perform majority of transactions including regular payment of interest and topping up of existing loan, without having to visit the branch. For instance, Manappuram Finance Ltd disbursed nearly INR 300 crore worth of gold loan through digital channel during the lockdown period when branches were closed. The rising gold prices have boosted the business, said V.P Nandakumar, CEO.