skip to Main Content

Gold lending activity set to reach new highs this fiscal year

Gold lending activity is expected to reach new highs this year, with many small businessmen and individuals having to pledge their household gold to cover their immediate expenses as their incomes dried up in the midst of ‘a second severe wave of Covid-19.

Small businesses and traders will need funds to restart operations once closures and local restrictions are lifted. Many of them typically opt for gold loans averaging 50,000 rupees, ET told.

Gold lending NBFCs expect their business to grow 15-50% year-on-year in this fiscal year.

“As there were lockdowns and restrictions in April and May in most parts of the country, people could not opt ​​for gold loans,” said George Alexander Muthoot, chief executive of, one of the nation’s largest gold-lending NBFCs. “Once the economy reopens, there will be a need for money to restart businesses and that is when there will be an increase in demand for gold loans. This also happened in the first phase of the pandemic. ”

Muthoot Finance’s gold lending business grew 26% year over year in 2020-2021 to Rs 52,622 crore. “Our target for the current fiscal year is 15% growth over fiscal 21,” Muthoot said.

Indel Money, another South Indian gold credit player, expects its business to grow by 50% in this fiscal year as it opens more branches and penetrates new regions.

“There is certain and should have more household gold to pledge as soon as the lockdown across the states is lifted and movements relax,” said Umesh Mohanan, executive director of Indel Money. “The sudden increase in expected demand is due to many factors. First, there is no moratorium this time around and no relaxation in terms of statutory commitments between the authorities. Thus, ordinary people are strapped for cash due to their committed exits compared to their limited entries. And second, this time the number of Covid cases is much higher, with a wide swath of age range affected. Deaths have been more numerous and post-Covid illnesses are also on the increase. ”

Mohanan said that a substantial increase in health care needs has prompted many households to opt for loans in gold.

However, clients may not get more money from pledging gold as prices have gone down and the outlook for gold is not bullish either.

“Amid lower growth and inflation risks, we believe the demand for gold and silver as a safe haven should weaken further, leading to lower prices in the medium to long term,” said Carsten Menke, Head of Next Generation Research at
wealth management firm Julius Baer. “This is unlikely to be offset by a rebound in demand in Asia. While Chinese and Indian imports have improved in recent times, we interpret this as a restocking of depleted stocks rather than a lasting increase. ”

This Post Has 0 Comments

Leave a Reply

Your email address will not be published.

Back To Top