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There is heightened interest for gold loans among borrowers as more farmers, small merchants and businesses kick-start stalled economic activity. Gold loans are the easiest and the fastest to be processed and disburse and, with the rising rates of the yellow metal, more money is now available for the same gram. According to RBI norms, 75% of the value of pawned gold can be lent.
Sample this: Private lender City Union Bank has seen a 7% spike in gold loan disbursements (when the normal average growth is 3%). Also, the average ticket size has doubled from Rs 2 lakh to Rs 3.5-Rs 4 lakh. The demand has increased in districts that fall in green zones, like Thanjavur, Madurai and Trichy in Tamil Nadu, indicating resumption of economic activity.
“We have disbursed Rs 60-crore gold loans, of which Rs 40 crore are new sanctions, in the last one month. The cost of borrowings stands at an average of 11% for gold loans and 9% for priority sector agri-gold loans,” said City Union Bank DGM R Lakshminarayan.