Gold loans regain some glitter
With 23,000 tonnes of gold stock and an annual consumption of 800-900 tonnes, the organised players in the gold loan market have seen a recovery in their growth rate, following a decline in gold prices that led to a rise in loan defaults
- Dec 14, 2017,
- Updated Dec 14, 2017 7:33 PM IST
After a continuous decline of five straight years, the gold loan market has seen a tepid increase in its growth rate, with a double digit growth in the last fiscal. There is, however, still a fair distance for the gold loan market to cover, to get its sheen back. India is among the largest consumers of gold, with a total stock of 23,000 tonnes in 2016 and an annual consumption of 800-900 tonnes.Between the time they were first introduced in the market, in 2008, till 2012, when the RBI stepped in with its regulations on the gold loan market, the industry saw a CAGR of nearly 95 per cent with people getting 85 per cent of gold's value as loan.In 2012, the RBI capped the maximum amount of loan against gold at 60 per cent of the market value of the metal. It also prohibited grant of loans against bullion and gold coins. From 2013, as gold prices declined, people started defaulting on the loans, leading to an increase in non performing assets (NPAs).In 2014, the RBI raised the limit of loan amount against gold to 75 per cent of their market value, while last year, after demonetisation, the maximum limit for loans disbursed as cash was reduced to Rs 20,000, from Rs 100,000 earlier.
After a continuous decline of five straight years, the gold loan market has seen a tepid increase in its growth rate, with a double digit growth in the last fiscal. There is, however, still a fair distance for the gold loan market to cover, to get its sheen back. India is among the largest consumers of gold, with a total stock of 23,000 tonnes in 2016 and an annual consumption of 800-900 tonnes.Between the time they were first introduced in the market, in 2008, till 2012, when the RBI stepped in with its regulations on the gold loan market, the industry saw a CAGR of nearly 95 per cent with people getting 85 per cent of gold's value as loan.In 2012, the RBI capped the maximum amount of loan against gold at 60 per cent of the market value of the metal. It also prohibited grant of loans against bullion and gold coins. From 2013, as gold prices declined, people started defaulting on the loans, leading to an increase in non performing assets (NPAs).In 2014, the RBI raised the limit of loan amount against gold to 75 per cent of their market value, while last year, after demonetisation, the maximum limit for loans disbursed as cash was reduced to Rs 20,000, from Rs 100,000 earlier.