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At a time when there is a cash crunch in most families, and banks are hesitant to offer personal loans lest they sour, people are taking gold loans to meet their immediate requirement for money.
The availability of gold jewellery at home and the ease of availing such a loan with minimum paper work and its short duration work in its favour, banking experts said.
The fear of a sustained economic loss due to the pandemic and the need for quick money for basic needs is fuelling the gold loan demand, lenders said.
Moreover, more money is disbursed per gram of gold depending on the carat which has customers in need of funds applying for such loans.
Gold loan can be availed in the quickest and simplest way with easy documentation.
Due to increased rates of gold, our bank is financing a higher amount per gram, Rs 3,150 per gm, Pune based Bank of Maharashtra said.
We can also say that in June, the demand has increased compared to the pre Covid-19 situation, the official added.
Lenders said many micro and small businesses are resorting to gold loans to crank up their businesses. TOI, in an earlier instance, had reported that many other loan schemes intended for MSMEs remain on paper.
In the current situation, gold glitters as a ray of hope to restart many micro and small businesses. This is a viable option for SME & MSME businessmen. It fulfills the immediate need for capital. An increase in the value of gold helps the customer raise a better loan
amount against the ornaments, Praveen Kutty, head of retail and SME banking, DCB Bank, said.
Gold loan lending non-bank finance company, Manappuram Finance, said there was no unusual spike in people seeking gold loans with them but more people closed their loans to sell the gold in the market for higher realizations.
After the first phase of lockdown, we observed that there was a spike in gold loan redemptions.
We understand that many of our customers were settling their loans in order to sell their gold to jewelers and take advantage of the high price of gold, V P Nandakumar, managing director and CEO, of Manappuram Finance Limited said.