Gold loans have always been one of the most reliable and secure loan options in India. They offer a convenient and accessible way to acquire funds against the value of assets. Presently, the gold loan market in India is predominantly managed by two major players; banks & NBFCs.
In this article, we will explore the main reasons behind this growing demand and provide you a glimpse into the present gold loan market.
Factors for the Rising Demand for Gold Loans in India
An analysis by CRISIL stated that demand for gold loans grew more than 20% in June over May 2024. The report identifies the growth trends and establishes that a 12% rise was seen in June compared to the average monthly loans in the previous quarter.
But what exactly is bringing this change?
Here are a few factors that are potentially responsible for the increasing demand for gold loans:
1. Quick Disbursal
Gold loans provide immediate liquidity, making them ideal for covering sudden costs such as educational expenses, unforeseen medical situations and more. Compared to traditional loans, gold loans have a quicker approval process, allowing applicants to access funds immediately. Apart from this, as the gold loan interest in India is also comparatively low, it provides an additional advantage.
2. Minimal Documentation
Gold loans generally require fewer documents compared to other unsecured loans. This simplifies and streamlines the application process, making it easier to obtain funds during time of emergency. The evaluation of the gold loan amount is relatively straightforward, resulting in faster loan approvals. They can be easily obtained from reliable financial institutions with little documentation.
The banks and NBFCs are the primary distributors of gold loans. These companies are well-equipped to handle the threats associated when it comes to gold price fluctuations.
3. Rising Gold Prices
The price of gold has increased over the years, so the value of gold held by individuals has also increased. People realise that using this gold as collateral for loans can be great because it will help them borrow more. Therefore, user search behaviour related to the demand for gold loans in India has also changed. Of late, a surge has been observed in the search for gold loans.
4. Economic Factors
During periods of uncertainty, people may turn to gold loans as a source of liquidity during financial downtowns. Apart from this, the gold loan market in India emerges as a ray of hope in times of economic duress. They serve as a financial lifeline for those experiencing job losses or reduced income.
5. Government Policies
The RBI plays a crucial role in setting monetary policies, including the Gold Loan Interest in India. They may offer tax benefits or exemptions related to such loans, making them even more attractive to the citizens.
6. Flexible Repayment Options
Individuals applying for gold loans can choose to repay the loan in instalments or with a single lump sum, which provides them with flexibility in repayment planning. Some financial institutions even offer tailor-made payment plans to suit the financial circumstances of the applicants.
7. Technology Advancements
The availability of online platforms for gold loan applications and disbursements has streamlined the process. With greater accessibility, citizens are leaving no stone unturned to make their aspirations successful.
The mobile apps also allow applicants to track their loan status and make payments. With such enhanced convenience, India's overall demand for gold loans has skyrocketed.
Bottom Line
As assessed, Indian households own massive quantities of gold, estimated at around 25,000 tonnes. With the changing mindset and a collective contribution of these factors, the demand for gold loans in the country is bound to surge. However, before making such major decisions, it is important to ponder over them and assess all the aspects for a successful outcome.
