George Alexander Muthoot, Managing Director of Muthoot Finance, reports a surge in gold loan demand. He links this rise to the growing difficulty in obtaining unsecured loans, like personal or SME loans. This challenge arises as financial institutions tighten their lending policies.
Record Gold Prices Fuel Growth in Gold Loan Sector
On September 16, gold prices soared to $2,580.81 per ounce. This was driven by a weakened US dollar and anticipated interest rate cuts. In 2024, gold prices jumped nearly 23% and 35% over the past year. This surge directly benefited India’s gold loan financiers.
Indian Gold Loan Market Expected to Double by 2029
A recent report by PwC India, titled Striking Gold: The Rise of India’s Gold Loan Market, projects that the organised gold loan market could double in size over the next five years. The market, currently valued at ₹7.1 lakh crore for 2023-24, is expected to reach ₹14.19 lakh crore by 2029.
Shift in Lending Focus Toward Gold Loans
The Reserve Bank of India’s new rules have shifted lenders’ focus to gold loans. Muthoot Finance, in particular, has seen a rise in demand for secured loans. Now, customers can quickly access funds by using their gold as collateral.
Increased Loan Value for Gold Collateral
George Alexander Muthoot noted that international gold prices jumped 60% in two years. Consequently, customers can now get ₹160 in loans for a certain amount of gold, up from ₹100, thanks to rising gold prices.
Significant Growth Potential for Organised Gold Loan Sector
Indian homes possess about 25,000 tonnes of gold, worth ₹126 lakh crore. However, only 5.6% of this is in gold loans. Moreover, 63% of the market is unorganised. This presents a big growth opportunity for banks and NBFCs.
Conclusion: A Promising Future for Gold Loans
Gold prices are rising, and unsecured loans are harder to get. So, demand for gold loans will likely increase. Companies like Muthoot Finance and other NBFCs are ready to benefit. They offer secure, easy financing to more customers.
