28-03-2017, 03:29 PM
Gold has long been a valuable commodity, particularly in India, where it is considered auspicious, and has been in use for centuries in the form of jewelry, coins and other assets. Although gold is a highly liquid asset, it was not until recently that consumers leverage it effectively to meet their liquidity needs. Lenders provide loans securing gold assets as collateral. Compared to the rest of the world, in India the gold loan market is big business. Until a decade ago, most of the loans were in the unorganized sector through lenders and lenders. However, this scenario changed with the entry of actors from the organized sector, such as banks and non-bank financial corporations (NBFCs), which now control more than 25% of the market. The organized gold loan market has grown to 40% CAGR from 2002 to 2010. NBFCs have been a major driving force behind this growth due to its extensive network, faster turnaround time, higher loan to value ratios and The ability to serve non-banking clients. Lately, banks have improved their features and gold loan services. Along with comparatively lower interest rates and charges, banks can gain market share at the expense of NBFCs in the near future. With rapid growth, regulatory scrutiny has increased in lending practices for gold loans. NBFCs are under a greater focus as a result of their higher interest rates and charges, and non-adherence to know their customer regulations (KYC). This may further affect the dominance of the NBFCs in the gold loan market. With only 1.2% of the total gold stock in the country today, gold loans have tremendous growth potential. However, companies need to develop distribution strategies, products and risk mitigation strategies to get a share of the pie in a cost-effective and sustainable way.
