Commodity Online
MUMBAI : At a time when most banks have closed or scaled down the personal loans and other non-collateral lending, Gold has come to the rescue of a large number of Indians who depend on loans for their business and other needs.
And who else other than World Gold Council will be heartened to make this happen. Gold is a traditional and emotional investment in India and WGC is now engaging banks to have gold as collateral for personal loans.
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“I don’t mind putting my gold for a loan. I would rather prefer this because in a collateral lending, the interest rates are low,” said Rajesh Sharma, a Mumbai based grocery shop owner who has been availing personal loans since the last three years on a regular basis.
HDFC Bank may be the first in the WGC radar to start such a lending. Already Gold based lending is a huge success in states like Kerala where financial institutions like Muthoot Group have made huge inroads into this. Muthoot has repeated the same Kerala model across the country with great success.
WGC, in the meanwhile, is penetrating in rural markets where gold is perhaps the only secured investment asset. But if it has to extent its lending strategy to rural areas, banks like HDFC will not suffice as its penetration in rural areas are very limited.
In a global financial meltdown, gold has come to the rescue of many investors as it consistently offered 12-14 per cent returns. But the pre-diwali sales have not been encouraging which is mainly attributed to poor liquidity and tight situation of those who lost money in the equity markets. Demand for gold in the first six months of 2008 was only 264 tonnes, 50% of what it used to be for the same period last year. The price volatility was also very high.
