How about this – Indian households are reservoirs of gold! It is estimated that yellow metal approximating 950 billion dollars is sitting pretty in Indian homes. In the lead are households of South India that account for 40% of the annual gold demand in the country. For centuries now, gold has been perceived as a low-risk investment and families invest in the precious metal as a tradition. This tradition is especially excruciating at the time of a daughter’s marriage. Parents spend lakhs of their hard-earned money to deck their bride-to-be daughter.
The last episode of Satyamev Jayate highlighted that eighty percent of bank loans in India are taken to meet dowry demands. As gold has remained the staple ingredient of the dowry hunger, it is no wonder that people take loans not just to buy gold, but also against a deposit of yellow metal during difficult times.
Look Who is Sitting on a Gold Mine!
In India, banks and non-banking finance companies (NBFCs) that provide gold loans, have recorded tremendous growth over the last couple of years. NBFCs such as Muthoot Finance and Manappuram Finance; banks including ICICI, HDFC, and Bank of India; ensure that gold jewelry is worth its weight in gold!!
An Economic Times article reveals that “Today, Muthoot Finance is the undisputed leader in gold finance with a 20% market share among organized players. The company says it owns 2,611 branches in 25 states. It services nearly 70,000 customers a day. The loans advanced are valued at Rs 12,897 crore as of November 2010.”
The Hub of the Gold Loan Market
Did you know that 65% of the gold loan market is in rural areas of India and
NBFCs such as Muthoot and Manappuram are taking advantage of this opportunity through hassle-free processes? A quick overview of their easy loan processing methodology leaves you wondering if indeed these organizations have a heart of gold ! Their hassle-free processes include:
- No documents for cross-verification – Get cash without providing income proofs or bank statements
- No processing fees – Get the exact monetary value of the gold jewelry you pledge without hidden cuts
- Instant loans – Pledge jewelry, sign documents, and receive cash in less than 15 minutes, (most of the times)
- Reasonable loan-to-value (LTV) limit – If you pledge gold of Rs.100, you get a loan of Rs.60!
- Varied interest rates and multiple re-payment options
However, not all that glistens is gold or “sona” (the Hindi word for gold). The Reserve Bank of India has recently capped the LTV of NBFCs to 60% (earlier, these companies provided loans at unrealistic LTVs of 90%) resulting in a drastic fall in their stock prices. There is no doubt that irrespective of fluctuating gold prices and stock values, Indians will continue to buy, trade, and wear gold excessively! Fortunately, Santa from the Santa Banta joke series seems to be an exception. Here is what Santa (Santa Banta Joke) thinks about “sona”:
Ek din ek daku Santa ke ghar mein ghus gaya aur bola: sona kahan hai?
Santa bola: ullu ke patthe. Pura ghar khali hai, kahin bhi soja!
Are you also like Santa? Do you also hum “Na chaahoon sona chaandi, na chaahoon heera moti, Yeh mere kis kaam kee” (from the popular Hindi film Bobby)? Write to us, let us know !