Monday, May 30, 2011

Indian Gold Loan Market Expanding

The lucrative nature of the Indian gold market is spawning a bigger industry, with more entrants and increasing competition.
Public sector banks have now started offering competitive rates for gold loans for agricultural purposes with Canara Bank offering loans for a low rate of 5% per annum while other major banks are offering from 6-8 per cent interest rate per annum. New generation banks such as HDFC Bank and ICICI Bank have also come in the forefront promoting gold loans for the common man.

Bankers say the default rate is much lower for gold loans because Indians do not want to risk losing their family jewelry. And unlike traditional personal loan, no credit checks are needed for gold loans.

According to estimates, the organized gold loan market in India stands at Rs 350-400 billion and has grown at an compound annual growth rate of 40% during 2002-2010 and is expected to grow at an annual rate of 35-40% over the next three years....
One finance company that's the largest in the business is taking the show on the road to the U.K. Muthoot Finance Ltd. is planning to open up three or four branches, hoping to capture business from Asian immigrants.


So far, the gold loan market has not made any real inroads into North America. That's because people aren't used to the idea, seeing jewelry as largely ornamental rather than as a store of wealth. If they want to turn jewelry into money, they prefer to sell outright. Those who have gold for savings or investment purposes prefer to hang onto it rather than make a loan on it.

As a result, the gold-loan business (such as it is) is still dominated by pawnshops.

9 comments:

  1. Gold loans have also started finding good space as compared to the other financial products particularly in the rural infested areas, not only because of the lack of other investment avenues but also because of the cultural values which it carries. Still there are certain areas which are not exposed to banks and the people find it easier to procure loans against gold.

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  4. Gold loan firms have moved on from being your local pawnshop and have a retail feel to it. Muthoot fincorp branches make you feel that you are dealing with professional personnel and their offers are great.

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