KOCHI/MUMBAI (Commodity Online): The numerous Hindi serials and movies which balked at men who pawn their wives’ gold jewellery will have to do a rethink in the present scenario.

Nowadays it is not a sin to pawn your wife’s gold jewellery as more and more middle class people are now banking on their gold jewellery to get loans from banks.

Apart from the price rise, the social stigma earlier attached to gold loans has almost totally disappeared and they are now widely recognised as acceptable means of raising funds for meeting urgent requirements by all segments of society.

This paradigm shift has helped many private financial firms to make a killing. One such organization is the 122-year-old Kochi-based Muthoot Finance.

The Muthoot Group claims to be the country’s largest lender against gold. The stigma against pledging gold was reinforced by the Hindi film industry and serials which inevitably portrayed women parting with their gold as a deep tragedy

A report in India’s leading business daily Economic Times said that situation is fast changing with women, especially in cities, becoming economically independent and taking an active part in the decision-making process. More and more people are now using such loans, whose tenures are typically up to three or six months, to finance their children’s education, particularly for meeting donation demands, which a bank will not entertain, car purchases, holiday trips or even to put up margin money for a home buy.

According to ET, in some ways, financing the above costs by pledging gold works out to be more advantageous than taking personal loans, on account of a lower interest rate (Muthoot, for instance, has a base rate of 13% while banks are known to charge PLR + 200-400 bps — a bp is one-hundredth of a percentage point — for personal loans, which could work out to as high as 15-16% on an annualised basis), non-penalty for pre-payment, hassle-free documentation and speedy disbursal of the loan.

Borrowing against their gold jewellery is an option that individuals falling in the middle-income category are increasingly looking at. The primary reason is that the gold rate has shot up, and, second, they are realising that the interest rate is lower than unsecured loans. In addition, the cash crunch arising out of the global slowdown has resulted in people considering this option.

NBFCs like Muthoot and Manappuram witnessed a rise in disbursals as well as the number of accounts.

Manappuram, which says it is the country’s largest listed and highest credit rated gold loan company, has seen a 15% year-on-year rise in the number of persons taking gold loans during the first six months of the current fiscal to 105,265, and a 28% increase in disbursals to Rs 2,105 crore. Over the same period, Muthoot has clocked a robust 75% growth in the number of persons availing of gold loans at 35,000 and an 81% increase in the amount disbursed at Rs 9,091 crore.

HDFC Bank, a lender that is actively promoting gold loans, has witnessed its business in this segment grow by over 60% year-on year.

Farmers and rural folk also raise need-based loans by pledging gold ornaments in a simple process compared to long, complex and expensive procedure of mortgaging property to meet their needs.

Standard gold of 99.5% purity prices has averaged Rs 14,903 per 10 gm in the fiscal year through October so far, up 21% from the average rate of Rs 12,349 in the year-ago period.