Recent Trends in Gold Loan Market in India

Almost everyone goes through a phase of financial distress at some point of time in their lives. Contrary to common belief, taking a loan to get over this crunch is not a bad idea. You might need this financial aid for business expansion, higher education, house construction or something else. The most important thing is choosing the right type of loan and paying it back on time. Things can get a little bit overwhelming when it comes to choosing the type of loan that will work for you as there are plenty of options to choose from and each one of them has its own advantages.

Applying for a loan might seem to be a complicated process at first (which it is not, of course). When there is an urgent need for funds, you would always like to go for the most convenient option and a gold loan is definitely one of them. In a country like India, people do not think of gold just as a precious metal. Indian households consider gold ornaments as the safest investment option, which comes in handy whenever there is an urgent need for funds. In the simplest words, in India gold loan is the fastest way to convert the yellow metal into cash without any risk of actually losing it. You can have the pledged gold ornaments back as soon as you repay the loan amount. When compared with the rest of the world, the gold loan market has been growing much faster in India.

Latest Trends in the Indian Gold Market

Earlier, the lending market used to be an unorganized sector with major involvement of local money lenders and pawnbrokers. But, things have changed now and there are a number of gold finance companies in India. With fast turnaround time, lower interest rates and higher loan-to-value ratios, these lending organizations have simplified the entire process of availing a gold loan in India.

Let’s dive deeper and discuss the most recent trends in the Indian gold market:

Increase in Demand

The Covid-19 pandemic has changed the world’s economy majorly, and the Indian gold loan market is no exception. With a significant decrease in cases, things are getting back to normal and overall demand for gold loans has gone up recently. And the major contribution is from small business owners who need working capital and salaried individuals who need to meet their personal requirements.

No Turning into NPA

Since gold loans are secured loans and for the entire loan tenure, the lending organization holds the physical gold, so there is no chance that the pledged gold will turn into an NPA (Non-performing Asset). If the borrower fails to repay the loan amount for some reason, the pledged gold can be auctioned to cover the losses.

Quick Disbursal

Being the secured loan it is, the application process is very simple and it requires minimal paperwork. In addition to this, lenders are providing maximum support. Quick disbursal and low interest rates are also two major reasons behind the ever-increasing demand for gold loans.

High Gold Prices

With gold prices increasing day by day, the popularity of gold loans is also increasing and the LTV ratio of gold loans also depends on the gold rates. Whenever there is a fluctuation in the market gold rates, the LTV ratios of existing loans also get affected.

LTV Ratio

The changes in LTV as per the RBI guidelines also play a major role as it is one of the deciding factors of the Indian gold market. For example, till the first quarter of the year 2021, RBI has allowed an LTV of 90 per cent, but at the start of the second quarter it came down to 75 per cent.

NBFCs

Until a few years ago, the Indian gold market was dominated by banks offering gold loans. But now that things have changed, a number of NBFCs have come forward with so many schemes and competitive interest rates. NBFCs are slowly becoming a preferred choice among people as they allow you to avail a gold loan instantly and have lesser regulations. Also, a number of borrowers are shifting their gold loans from banks to NBFCs as they are more flexible.

Now that you know all about gold loans and the recent trends in the Indian gold market, you have all the reasons to consider gold loans as an option, the next time you need some financial aid. And, you will not have to make Google searches like the best gold loan in India or the best gold loan company in India. Muthoot Finance offers gold loans with quick disbursal, hassle-free paperwork and attractive interest rates in India. Visit your nearest Muthoot Finance branch to know more.