The gold loan is one such loan option that can help you acquire funds for any financial need. Irrespective of your income level and credit history, you can avail of a gold loan. This ease in availing a gold loan has contributed significantly to increase its popularity in recent years. As per the KPMG report, India’s gold loan market is predicted to reach Rs. 4.6 lakh crore by 2022 with a growth rate of 13.4 per cent, compounded on a five-year basis.
In the last fiscal year of 2018-19, many gold loan companies increased the number of their branches throughout the country, especially in the northern and eastern states. As per the KPMG India’s report ‘Return of gold financiers in India’s organized lending market’, these gold loan companies are expected to focus on utilizing their assets and leveraging these increased branches to maximize their branch level AUM (Asset under Management) along with customer outreach.
The introduction of digital and online models of gold loan by various NBFCs and new-age fintech has led to the facility of the gold loan being added to the list of services that are provided at the customer’s doorstep. This has enabled them to open up an untapped market, which has recently become digitally enabled. The organized sector of India’s gold loan comprises NBFCs, banks, and Nidhi companies. They together form 35 per cent of the total gold loan market. The report also stated that today’s gold loan companies are competing not just against each other but also financial services providers as well.
However, the current size of India’s unorganized gold loan sector is almost thrice that of the organized sector. This, in itself, shows a high growth potential, which has been continuously encroached by various financial players that are in the business of providing unsecured loans.
Also, with the growth of the gold loan market, another observation that has been made is that in the last few years, gold loan players have saturated geographically and have started exploring other financial products like small and medium enterprise loans to maintain their growth. The KPMG report also stated that nowadays, the customers who previously pledged their gold to fund their emergency cash requirement for any other purpose, now have other risk-free avenues through which they can acquire funds without any collateral. To quote the statement of the report, “Lenders today are partnering with fin-tech companies to leverage the advancement in technology for developing enhanced underwriting capabilities that are agnostic to the availability of customer credit history.”
The introduction of new technological reforms and underwriting services, the popularity of other unsecured products like personal loan, credit card, credit card loan, durable consumer loans are on the rise always. The key challenges, however, which was mentioned by the KPMG report was gold market volatility and the cash crunch of the NBFC sector. In 2019, the gold market saw an all-time high in the price. Such a situation has made the gold loan companies conservative in advancing gold loans until the price stabilizes. In such scenarios, companies will be promoting low loan to value ratio along with lower tenure, to mitigate the risk of volatile gold prices and prevent an LTV breach.
Even though the global prediction for the gold market is that the prices will fall in the long term, the gold loan market is giving high hopes of growth, with banks becoming more strict in their credit disbursement. As per the report, gold loan NBFCs are expected to continue as fortune runners in the time of quick decision making. The faster adoption and capture of new markets will give them the advantage.
The latest tips given by all the financial advisory state that gold ornaments are very precious and useful ornaments. Selling your gold jewels should be avoided. Also, people have precious sentiments and emotions attached to the gold. It does not seem to be a good idea to sell gold ornaments. People can instead use their jewels as a resource for investment. Once the gold loan is repaid, the people will get back their gold. People can use and reuse it multiple times.
Also, the gold loan is the only loan which can be availed while we have a low credit score. No doubt gold can work at its best. But it is advised to the people to study the market thoroughly and evaluate their gold. Higher the value of gold, higher will be the returns. Be a smart person. Being aware and informed is the only key.
Moreover, people can use the money for any purpose, be it education, marriage, or expanding their existing business or even opening a new one. Be active, be informed, be smart and pay on time. Kick start your journey for getting a gold loan today. Secure your financial life with gold.
