A gold loan is a loan in opposition to gold. It is a secured loan taken by the borrower from a lender by pledging their gold as collateral. A loan amount is provided typically up to 80% by some percentage of the gold, based on the current market cost and quality.
The gold loan section for organized commercial banks recorded the highest credit growth at 33.8% among all the sectors. While many people are looking to convert their gold holdings to meet their immediate needs.
The gold loan very skillful with banks has increased from Rs 46,415 crore to Rs 62,101 crore in 2020. Since March 2020, it has increased by 86.4%, or Rs 33,308 crore, RBI data shows. Industry insiders note this is only the business done by programmed commercial banks.
Gold loans will utility not just the requirement side but also the supply side vital, as many banks and their target this product segment adequate on account risk profile. Here the question is: When should you consider taking a gold loan?
The main reason was to take the gold loan trends many businesses shut, jobs lost and salaries tearing after the pandemic began last year, their gold to borrow money to meet necessary expenditure as well as emergency medical requirements. Struggling small businesses may also have tried to raise their funds this way.
The gold loans had the secure option because the resale value, if the loan is not repaid, is higher than all security, for any bank.
Some private sector banks boost up the number of branches offering gold loans in rural India, where money lenders remain predictable. A lower interest rate on gold loans was another attraction parts for the borrower after the RBI slashed rates during the pandemic.
More importantly, it’s not just the recent process gold loans have continued in India for ages, carried on by moneylenders and pawnbrokers who operate in lanes by lanes across the country.
Without a valid credit score, they face many difficulties in getting loans from banks. With the massive demands of interest rates of local moneylenders as the reference, the deal offered by gold loan NBFCs was a compelling proposition by contrast.