On Monday, prices of 24-carat gold were hovering around ₹55,540 per 10 gm, up from ₹52,000 a month ago.
“A rising gold price always is a win-win situation for the customers and the gold loan company,” said Muthoot Fincorp managing director John Muthoot. “In the last three months, gold prices have shown an upward trend and in the last month it has appreciated more. If this trend in gold prices continues, then from January 15 to September, we will witness good business.”
Higher gold prices propel small businesses and businesses from the unorganised segments to seek gold loans to meet their working capital requirements.
Gold loan offers easy access to credit to small businesses as it is a purely asset-backed loan and availing a gold loan does not require any credit history check. Higher gold price leads to better realisation of the value of the gold to be pledged. It also means lower collateral requirements under the stipulated loan-to-value framework, said Umesh Mohanan, CEO, Indel Money.
“Given the steady revival of the economy and the revival of gold loan demand, we expect a healthy growth in assets under management in the third and fourth quarters of 2022-23,” said Mohanan.
George Alexander Muthoot, managing director, Muthoot Finance, however, said higher gold prices cannot be considered a dictating factor for driving gold loan demand from micro, small and medium enterprises.
“Gold loan demand is driven by diverse needs of customers. Gold loans are typically taken as bridge loans and for assisting productive business activities. The demand for gold loans is more or less the same across India. However, we are witnessing slightly more demand from the northern states,” said Muthoot.
He said gold loan demand is driven by the uptick in the economy and buoyancy in the market, adding the company expects these factors to remain favourable throughout this fiscal.