Gold Loan Financing in India: Current Market Scenario and Key Driving Factors
Gold is one of the most important investments that holds a special place in the asset class. Its popularity is because it gives a hedge against inflation. This is why it is linked to financial stability and asset building. Earlier, people used to buy gold ornaments and keep them in lockers for years. However, times have changed, and now gold loan financing is a smart way to utilise gold articles. A gold loan is given on a per-gram rate of gold and is considered a better option than a personal loan.
The Current Market Scenario of Gold Loans
Gold loans are a big part of fulfilling the market’s credit demand. It comes above other secured lending products. Borrowers are opting for gold loans not just to fulfil financial commitments but also to go on vacation and start a business. So, the market penetration is high. In fact, according to Market Research Future, the gold loan market is expected to reach 69.32 USD billion by 2035.
Key Factors Driving the Gold Loan Popularity in India
Regulatory Framework
The Reserve Bank of India has stringent regulations for the lending market. It ensures borrowers’ trust and builds lenders’ credibility. Top banks and non-banking financial companies (NBFCs) follow RBI guidelines for lending gold.
Low Interest Rates
This is one of the biggest drivers for gold loan growth in recent times. Borrowers can just search online for “gold loan rate today” and apply for a low-interest-rate loan from their preferred lender. The lender keeps gold as collateral, which makes it a secured loan. It gives lenders confidence to recover money from pledged gold if the borrower fails to pay back. So, the interest rates are fairly low.
Gold Price Volatility
In the past few years, there have been huge fluctuations in gold prices. Gold owners can get higher loan amounts on their gold articles if the gold prices are high. This has led to an increase in gold loan financing in recent times.
Many new players are now offering gold loans with attractive features on the market. So, the future of gold loan financing is bright. However, borrowers should always rely on established lenders who offer complete security for pledged gold.
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