Pledging Gold For Loans
Outlook Money|September 2020
Pledging Gold For Loans
Soaring price of the yellow metal is fuelling rise in demand for gold loans
Rajat Mishra

Gold is often seen as an auspicious asset in India with good gains and acts as a safe haven during crisis. With pandemic looming large, the yellow metal has seen a sudden spike in demand.

Tapan Patel, Senior Analyst, Commodities, HDFC Securities explaining the reason behind the picking up demand for gold-backed loans, says: “There are two reasons which are driving the rise in demand of gold-backed loans in India- one, gold prices are going high and secondly, there is a liquidity crunch in the market due to COVID-19 induced pandemic.”

These are secured loans where gold articles are taken as collateral by the lending bank or NBFC. The loan is given to borrowers against gold as a collateral. The tenure of the gold varies with every lender and so do interest rates.

India’s largest lender SBI is offering gold loans at an interest of 7 to 7.50 per cent with the processing fee of 0.50 per cent. PNB is offering gold loans at an interest rate of 8.60 to 9.15 per cent with a processing fee of 0.75 per cent. Muthoot Finance offers loans at an interest rate of 12-27 per cent.

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September 2020