Gold loan demand has picked up from the beginning of July as Covid-19 cases are declining and economic activities are on the upswing with many states easing restrictions. Gold loan non-banking finance companies (NBFCs) said customer walk-ins have increased in the past fortnight.
customers are opting for is Rs 55,000-60,000, they said.
Gold loan NBFCs are seeing more competition in the gold loan business in the current financial year as the special allowance given by the Reserve Bank of India to banks to take an LTV (loan-to-value) exposure against gold loan was valid till March 31, 2021. Banks had witnessed a significant growth in gold loan business due to this special allowance. On the contrary, gold loan NBFCs are allowed an LTV exposure of 75% against gold loan.
“Definitely, there will be a stiffer competition. But that helps us to remain focussed. With the large number of satisfied customers we have, we have the advantage to network and add more customers to our fold,” said George Alexander Muthoot, managing director, Muthoot Finance NSE -0.74 %. “We are optimistic and expect a resurgence in economic activities. Surely, this will accelerate the demand for gold loans.”
The company’s guidance for the current financial year is 15% growth year-on-year, said Muthoot.
Umesh Mohanan, CEO of Indel Money, said sometimes customers in need of money against pledging of gold do not get loans easily from banks. “The reason behind the jump in gold loans is the prevailing credit crunch complemented
by lack of moratorium during this wave and the financial support policy laid down. It is not accessible to all common people or small-time business persons as the riders on the policy coupled with discretionary authority of the banks keeps many from accessing easy and instant credit in order to address their immediate problems,” he said.
In this scenario, Mohanan said, gold loan schemes are a saviour for the small business people as they get instant access to cash and at a longer tenure, making it an alternative source of long-term capital.