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Lenders shift focus to gold loans as borrowers line up for cash

15-Feb-2021

Lenders shift focus to gold loans as borrowers line up for cash
  • Experts said the recent surge in gold prices have also added to current demand, allowing borrowers to raise potentially larger sums against the same quantity of gold
  • Lenders seem more comfortable with secured loans, where chances of recovery are greater.

Mumbai: Growing economic uncertainty due to the pandemic has led to a surge in demand for gold loans, with some lenders witnessing up to 30% growth in amounts disbursed. While a large portion of borrowers continue to avail these loans to tide over immediate cash shortage, many lenders are moving away from unsecured credit to gold loans, which provide adequate risk cover against any future default, according to industry experts.

John Muthoot, chairman, Muthoot Pappachan Group, said the drying up of unsecured loans post-lockdown and the moratorium period has pushed borrowers towards gold loans. “While owning gold has always been a boon, the higher prices during this period have helped borrowers get maximum value for their gold. Muthoot FinCorp has disbursed about 9,000 crore from April-June, an increase of 30%, from the previous year to almost 2 million customers,” said Muthoot. Muthoot FinCorp is one of the non-bank financiers of the Pappachan Group.

Originally Posted On :Muthoot Fincorp NCD at Livemint