MUMBAI (Commodity Online): With gold prices posting big rises, several private financing companies have increased their business in gold loans. Big banks’ decision to cut personal loans also added to the boom for gold loans.

According to media reports, finance companies have witnessed 80-100% growth in their gold loan business as borrowers have increasingly started looking at gold jewellery as a collateral for loans.

The curtailing of personal loans by commercial banks has helped NBFCs engaged in disbursement of gold loans. Several of them specialise in gold loans and derive their strength from hassle-free and expeditious disbursement of loans. The bullish price trend in gold has added to the comfort level of lenders as they find it very convenient as a collateral.

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The Muthoot Group, which claims to be the country’s largest lender against gold, claimed that the company would increase its gold loans portfolio to over Rs 4,000 crore in the next 2 years.

As banks are very cautious on their business front, they do not take any unwanted risks on defaulters. On the other hand some companies specialised in this business target only for rural farmers and needy costumers.

Manappuram Group said the company has seen the maximum growth in last 3-4 months. At present it has a healthy loan book of over Rs 2,000 crore and till September 30 it was Rs 1728 crore. If the current trend continues, the group will achieve over 80-100 per cent growth in 2-3 years’ time.

Even commercial banks have now seen the potential in the gold loan business.