Gold loans glitter on personal loan crackdown

The regulatory clampdown on unsecured personal loans has given a fillip to loans against the yellow metal, with gold loans soaring in the last few months.

- Shayan Ghosh & Anshika Kayastha

Rising gold prices on the back of escalating global conflict and uncertainty have also aided demand for gold loans, as customers reassess the value of their collateral and seek more credit against it. Loans against gold jewellery grew at a staggering 51% in September, as against 15% in March, latest central bank data showed. On the other hand, personal loans grew at 11.4% in September, the slowest in almost four years, nearly a year after RBI raised risk weights on unsecured loans or those not backed by collateral.

To be sure, at ₹1.5 trillion, the outstanding base of gold loans is a fraction of personal loans which stood at ₹14.3 trillion as on 30 September.

"When other channels of funding become tight for borrowers-as in the case with unsecured loans right now- technically, there will be a tilt towards gold loans," said Jinay Gala, director, India Ratings and Research Pvt.