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Gold loan NBFCs and jewellers see gold shining in 2019

PB Jayakumar     December 21, 2018

Shadows over gold sales and gold loan companies will wane and are likely to have good growth in the New Year, say industry experts.

Gold loan non banking finance (NBFC) companies had to borrow at a higher rate in the past few months following the IL&FS crisis, which created a liquidity crisis and reluctance of banks to lend to the NBFCs. The situation was a knee-jerk reaction to the IL&FS issue. Now the situation has improved and is returning to normalcy, says VP Nandakumar, Managing Director and CEO of Manappuram Finance.

"High cost borrowing caused our industry to increase interest rates by 0.5-0.6 per cent and this was passed on to the customers. Soon normalcy will restore and the New Year looks bright for us," says Nandakumar. He pointed out that one among the key positives for the next year is increased spending from the government and liberal incentives for public as elections are approaching. For the gold loan industry, the New Year will see organised players coming out with more diverse products and increased use of technology in business, he said.

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The New Year will be a better year for gold retailers as the issues related to GST and pangs of demonetisation are waning away, says Ramesh Kalyanaraman, executive director of Kalyan Jewellers.

"The festival season is helpful to have higher sales across the country and sales are picking up," he said.

After two consecutive quarters of year-on-year decline, Indian jewellery demand had grown 10 per cent in the third quarter of 2018 from 134.8 tonnes in Q3 2017 to 148.8 tonnes in the third quarter of 2018, according to data from the World Gold Council, an agency tracking trends in gold sales.

The third quarter 2018 demand was boosted in early August, when the local gold price dipped below Rs 29,700/10 grams - the lowest level since January. This attracted bargain-hunting consumers, who had been waiting for a good time to enter the market. Mid-August saw a sharp rise in the local gold price as the rupee depreciated against the US dollar. Outside the traditional festival and wedding season, demand eased towards the end of the month and into September. Jewellery demand was further dampened by the inauspicious period of Shraaddh (also known as Pitru Paksha), a time when gold purchases are put on hold, the World Gold Council had assessed.

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