Rush for Gold Loans Seen as Indians Seek Refuge on Slowdown

Indians may borrow more against their stash of gold as the world’s biggest lockdown raises financial stress in an economy that’s set for its first contraction in four decades. Indians are the biggest consumers of gold after China and hold the largest hoard of the precious metal. Gold is both an insurance policy and a retirement plan in a country that lacks robust social welfare systems or widespread access to formal credit. And with economic activity coming to a virtual standstill after Prime Minister Narendra Modi ordered a 40-day nationwide lockdown to combat the coronavirus, more Indians are likely to turn to gold loan companies to raise money against the precious metal.

“Recycling and collateralized loans against gold may be expected to grow exponentially in the next few quarters,” P.R. Somasundaram, managing director for India at the World Gold Council, said in an interview. “There will definitely be a strong growth in that area for two reasons: the prices are going up -- they will get more for the same grammage -- and the second is that banks are not going to be in a position to lend just like that.”