gold loans gaining popularity

7/26/2019 gold loans gaining popularity

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Gold loans gain popularity

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Hyderabad: With her sisters

wedding just two weeks away in

May, Jomol Mathew needed to raise

Rs1 lakh in a hurry to pay for thewedding epenses


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! middle"#lass homemaker from

$erumba%oor, in &rnakulam distri#t

of 'erala, she approa#hed a lo#al

bran#h of Manappuram (inan#e )tdon the ad%i#e of a friend and,

o%er#oming initial *ualms, pledged

+g of gold in return for the moneyshe needed-


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./ did not ha%e to go through thekind of lengthy and tediousformalities the regular banks

mandate for taking a loan,0 Mathew,who is in her late s, said in atelephone inter%iew from$erumba%oor- .!nother big

ad%antage is the time taken for theloan pro#ess- Within minutes, / gotthe #ash-0


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(rom $erumba%oor to $atna,

borrowers su#h as Mathew in need

of emergen#y funds ha%e in re#ent

years been in#reasingly turning togold loans, attra#ted by the li*uidity

and #on%enien#e they offer2

minimal paperwork and almostinstantaneous a##ess to #ash after

the metal passes purity tests-


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!##ording to a report by /#raManagement 3onsulting 4er%i#es)td, the organi5ed gold loan market

in /ndia2the worlds biggest#onsumer of the metal2grew at a#ompounded annual growth rate63!7R8 of 9 between and

1, and is poised to epand ;;"91 in 11-


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./t is a tool of finan#ial in#lusion

and is %ery important to a #ountry

like /ndia where most of the

families hold gold in some *uantityat least,0 said =-$-


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1? tonnes

parked in the %aults of the Reser%e

@ank of /ndia-


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of /ndias gross

domesti# produ#t 67A$8-


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-1? to

Rs,1;? per gram at the end ofJune from Rs1,+;+ per gram a year

earlier, a##ording to

7oldpri#eindia-net, whi#h tra#ksgold market trends-


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Bnly 1 of pri%ately held gold in

the #ountry is in the loan market- Bf

the 1, only around ? is in the

organi5ed market with the restbeing in the hands of pawn shops

and money lenders, a##ording to

/#ra Management 3onsultings.7old Market report 10-


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@ut the su##ess of Manappuram

and Muthoot in re#ent years is

attra#ting other finan#e #ompanies

to the business- CholamandalamInvestment and Finance Co.

Ltd63/(3)8 is set to enter the gold

loan business, the BusinessStandard had reported on > May-


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Reliance Commercial Finance Pvt.

Ltd, a part of !nil !mbani"owned

Relian#e 7roup, has laun#hed a

%ariant2gi%ing loans against unitsheld by in%estors in the gold fund

of Relian#e Mutual (und-


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@esides households, gold lenders

are trying to tap a new market in a

#ountry where gold jewellery has

traditionally been salted away infamily %aults to be passed on from

generation to generation as

heirlooms rather than a fundingsour#e, a##ording to some

analysts-


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.7old, in spite of its high

#ommodity %alue, was always an

unprodu#ti%e asset kept at home,0

said Harsh =ardhan Roongta, #hiefee#uti%e offi#er ofApna Paisa Pvt.

Ltd, an online pro%ider of

information on loans-


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.7old finan#ing C@(3s 6non"

banking finan#ial #ompanies8 are

targeting a new segment of

#ustomers who otherwise wouldnot ha%e taken a gold loan,0 he

said- .(or instan#e, businessmen

who want to start a new business%enture now approa#h gold

finan#ing #ompanies-0


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.More than > of our bran#hes

are in rural and semi"urban areas,

where lo#al money lenders and

gold pawn brokers dominate themarket-


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We are still epanding our

business there,0 said 7eorge

!leander Muthoot, managing

dire#tor of the Muthoot 7roup of#ompanies, in a telephone

inter%iew-


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Muthoot (inan#e posted a net

profit of Rs9D; #rore last year, up

11E from the pre%ious year-

!##ording to its website, the#ompany had loans outstanding of

Rs1?,E+ #rore at the end of the

last fis#al, not#hing up 119 annualgrowth- /t has around ;,

bran#hes a#ross the #ountry-


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.We are trying to make the businessmore transparent and #on%enient, ina way that it #aters to the needs of

e%en the upper middle #lass in the#ountry,0 said 7eorge Muthoot, whoat the time of the #ompanys listingin May predi#ted that the rising pri#e

of gold would boost the borrowingpower of gold owners and benefithis #ompany-


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Manappuram (inan#e, whi#h has

,?>? bran#hes a#ross /ndia,

posted a net profit of Rs+; #rore

in the last fis#al, up 1;? from theyear before, and had loans

outstanding of RsE,? #rore-


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./n spite of the tight li*uidity

problems in the market and the

o%erall e#onomy slowdown, we

epe#t to register a > growth inre%enues this year,0 Candakumar

said-


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!t the time of taking a loan,

#ustomers need to submit identity

proof, whi#h is mandatory under

the know"your"#ustomer rules-


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!t Manappuram and Muthoot,

depending upon the loan to %alue

of the gold, the rates %ary between

1 and 9- )o#al money lenders#harge ;> on a%erage for gold

loans


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!##ording to the finan#e

#ompanies, gold loans are the

safest mode of lending- More than

the #ommodity %alue, the emotionalatta#hment the borrower has with

the metal makes gold the safest

#ollateral-


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.Manappurams defaulted loans

6non"performing assets8 ha%e ne%er

gone beyond -? of the total

loan- )ast year it was just -1+,0said Candakumar-


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!##ording to =-!- Joseph,

managing dire#tor and #hief

ee#uti%e offi#er of 4outh /ndian

@ank, gold loans are not prone torisks #aused by flu#tuations in the

%alue of the metal-


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)enders typi#ally ad%an#e E of

the %alue of the #ollateral, lea%ing

themsel%es a margin of safety-


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7old finan#ing growth has been

promoted by hea%y ad%ertising-

Manappuram, for instan#e, #ounts

among its #elebrity brandambassadors, @ollywood

a#tor !kshay 'umar and 4outh

/ndian a#tors Mohanlal, =enkateshand =ikram-


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.


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7old lenders may need to in%est

more to epand more rapidly in

markets where they still ha%e a

limited presen#eF they still do alions share of their business in the

south-


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.


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.


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!##ording to 4riram, the growth

will ha%e to #ome from taking

market share from unorgani5ed

money lenders, whi#h #alls formore intensi%e marketing in interior

and rural lo#ations-


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gold loans gaining popularity

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