Shutdown causes spurt in demand for gold loans

The general shutdown of normal economic activities, loanees’ inability to keep repayment schedules on unsecured loans and financial burdens imposed by restrictions on businesses have fuelled demand for gold loan in the State. Incidentally, some establishments have seen over 20% rise in business on year-to-year basis.

“Gold is virtually liquid cash. It is safe anywhere from losses and theft even in places where it is pledged,” said sources in a leading gold loan company on Wednesday reacting to the uptrend in business during the last financial year. Early indications are that the trend will continue. But they added, “It is too early to comment on the new year” due largely to shutdown of schools, disruption in the agricultural cycle, and people being forced to stay home.

Kerala State Financial Enterprises (KSFE), a State-owned chit and gold loan company, has seen demand for its Saukhya loan, aimed exclusively at those afflicted by COVID-19, go up by ₹5 crore over two months. The company provides a loan of up to ₹1 lakh to the family or close relative of one who is treated for COVID-19 for a period of six months at an interest rate of 5%. This could be the lowest rate available for the purpose, sources said. The facility, which was announced on June 15, will be available till July 15.

KSFE’s total asset holdings, including gold, deposits, and chit subscription, rose to around ₹55,600 crore by the end of May, company sources said even as its board is set to meet on Thursday.

Muthoot Finance saw its net profit go up 23% to touch ₹3,722 crore during the last financial year from ₹3,018 crore in the previous year. The company’s asset holding went up to ₹52,622 crore. Sources said there had been fluctuations in the demand for gold loans, but the COVID-19 crisis had seen people use gold positively.

Sources in Manappuram Finance said they expected business to normalise. “At present, our branches are getting back to normal after the lockdown. During the lockdown, we were able to serve our customers through online channels. However, new customer acquisition becomes difficult,” they added.

The financial year ending March 2021 had seen demand for gold loans rise remarkably in the aftermath of the first wave of the pandemic, mainly because banks and other non-banking financial companies (NBFCs) had initially become risk averse. The trend was helped also by the rising gold price. The company’s gold loans in 2021 grew by 12.44% to reach ₹19,077.05 crore.

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Printable version | Aug 4, 2021 5:43:26 PM | https://www.thehindu.com/news/cities/Kochi/shutdown-causes-spurt-in-demand-for-gold-loans/article34932466.ece

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