NBFCs and Gold Loans in India
Why Gold Loans Are Big in India
Indian households hold huge amounts of gold, and gold loans give quick cash against it, making them a major business.
Gold is India’s favourite savings asset, and also a favourite collateral.
Household gold
India’s households hold enormous stocks of gold, estimated in the tens of thousands of tonnes.
How a gold loan works
A borrower deposits jewellery, gets a loan of a fraction of its value and repays with interest to reclaim it.
Loan-to-value
The RBI limits the loan to a share of the gold’s value, currently up to 75 per cent, to leave a safety margin.
Who borrows
Farmers, small traders and households in urgent need use gold loans for their speed and low paperwork.
A trader pledges bangles in the morning and has working capital within the hour.
Gold prices can fall.
- Households hold huge amounts of gold.
- Gold loans are fast.
- RBI limits loan-to-value.
- Users include farmers and traders.
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