Our lives have torn apart by the lockdown amid the COVID Pandemic, and the worst affected are the wage earners, shopkeepers, traders, small business owners, and self-employed individuals, such as carpenters and electricians. These people have completely lost their means of livelihood and are struggling to revive their income sources. In these times, it is expected that a gold loan will help them to open their shut business for months and overcome liquidity challenges.
The exploitation of gold loan products in the lockdown:
Gold loans are certainly the major loan product relevant in these times. While a lot of private sector banks and non-banking financial institutions are facing the liquidity crisis, they are turning to gold loan products to survive their daily operations and also help the customers to revive their business.
Here are some of the initiatives taken by major banks with the rising demand for gold loan products:
- To exploit the demand for gold loans, Canara Bank has set up a gold loan business vertical. It is a product backed by gold ornaments. Previously, it also launched a special campaign to provide gold loan at a lower interest rate of 7.85% till the end of June 2020.
- Further to provide easy access to gold loans in the market, State Bank of India announced that the gold loans can be availed through YONO app. It is also sending messages to the eligible customers about the product.
- Banks are also making efforts to provide a high loan to value for gold loans. In this direction, The Tamil Nadu State Apex Co-Operative Bank Limited launched a unique scheme for evaluating the gold at higher values than the regular valuation.
- Various small banks and non-banking financial institutions are also looking for an opportunity for entering or expanding in the gold loan business. Among small finance banks, Ujjivan is one such bank which is evaluating options for gold loan business. ESAF and Jana Finance, which are already in the gold loan market, are also finding ways for expansion.
Why are gold loans an ideal choice for getting finance in these times?
- The primary reason why people are attracted towards getting a gold loan is that the markets for a gold loan are ideal. You can easily avail loans. It is because to get a gold loan, you don’t require to submit any documents for income proof or CIBIL. These are must-have documents for availing another loan. In the times when people are facing job loss or salary cuts, a gold loan taken against gold ornaments is the perfect option.
- Online gold markets are also one reason why people are looking for gold loans. In the present scenario, most of the financial institutions are providing an in-house evaluation of gold loans. The procedure of getting a gold loan is entirely digital. From filling the gold loan application to getting funds, you don’t need to step out of your house.
- Also, you can get a gold loan at lower interest rates than personal loans. It is because gold loans are secured in nature.
- Gold loans are also an excellent option for lenders as most of the institutions are facing liquidity challenges. It is expected that in the coming times these will further lower down.
Conclusion: Gold which is an auspicious yellow metal for Indian households, is lying idle with most of the households. It is estimated that nearly 22,000-25,000 tonnes of gold are available with the people of which Rural India accounts for 65% of this gold stock. Seeing the potential of gold and the rising gold prices, it would not be wrong to say that the demand for the gold loan will increase in future.