Gold loans help India weather the COVID-19 storm- Here's how-

Mumbai, November 24: Demand for gold loans, both through banks and non-banking financial companies has grown in response to the economic impact of the COVID-19 pandemic. As a result, outstanding organised gold loan is expected to grow to INR 4,051bn in FY 2021 from INR 3,448bn in FY 2020, read the report by Gold Hub India. Technology has been a key enabler in the growth of gold loan NBFCs in recent years, it said.

 

 

While gold demand in India has softened in 2020, it has not fallen out of favour. Gold has been increasingly used as a collateral to meet the financing needs of individuals and small businesses. It provides capital preservation, liquidity, and source of funding during tough economic times – supporting the relevance of gold as a strategic asset in India.

 

Pledging gold as collateral to meet financing needs has been an ever-present feature of the Indian gold market. Indian households use gold loans to meet the financing needs for health, education and marriage, while small businesses use them for their working capital requirement.

 

Demand for gold dropped to 892.3t in Q3, its lowest quarterly total since Q3 2009, as consumers and investors continued to battle the effects of the global pandemic. At 2,972.1t year-to-date demand is 10 per cent below the same period of 2019. Although jewellery demand improved from the Q2 record low, the combination of continued social restrictions, economic slowdown and a strong gold price proved onerous for many jewellery buyers, demand of 333t was 29 per cent below an already relatively anaemic Q3 2019.