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Indian families, sitting on the world’s biggest private stash of gold, are rushing to borrow against their jewelry as the precious metal rallies to records and the coronavirus pandemic fuels an economic downturn. Now, financial firms and banks are using that demand to lure more customers from pawnbrokers and money lenders.
The added competition could lower borrowing costs for Indian consumers, who in desperate moments of financial stress often pay exorbitant rates to informal lenders to use gold as collateral. Firms like HDFC Bank Ltd. and Federal Bank Ltd. are expanding the loans they make against the precious metal. India’s gold lenders, such as Muthoot Finance Ltd. and Manappuram Finance Ltd., are making it easier for their clients to borrow.
Manappuram is offering gold-backed loans at the customer’s doorsteps via a 24-hour bank network since people are reluctant to leave their homes while coronavirus cases are surging in India. And it has staff and vehicles on standby to service client requests. HDFC Bank is boosting the number of branches offering such loans in rural India, where money lenders remain the norm.