Gold loans take the shine out of personal loans

RETAIL BORROWERS ARE increasingly opting for gold loans over personal loans, bankers said, as surging bullion prices allow them to raise larger sums at lower interest rates.

- KSHIPRA PETKAR

Bank credit to loans against gold jewellery more than doubled to 128.5% in October from 65% a year earlier, reaching ₹3.37 lakh crore, according to sectoral deployment data from the Reserve Bank of India. By contrast, growth in the "other personal loans" segment slowed to 9.9% from 10.4% a year ago, while outstanding credit card outstanding fell to 7.7% from nearly 17% a year ago.

SBI Chairman CS Setty told FE that the scaling of the bank's personal loans business has not been as rapid as they would like, and it was largely due to rise in gold prices.

"Many salaried customers are opting for gold loans instead, since they can access larger amounts at cheaper rates compared to unsecured personal loans," he said.

In fact, given the current situation Setty added that when one talks about personal loans, one should include both unsecured loans and gold loans together.