Coronavirus pandemic will push gold lending to $55.2 billion in 2020-21: WGC

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With gold being a prominent feature of India’s investment landscape, the demand for gold loans has increased due to the impact of the COVID-19 pandemic and is expected to reach Rs 4,05,100 crore (USD 55.2 billion) in 2020-21, according to a report.

“Demand for gold loans, both through banks and NBFC, has increased in response to the economic impact of the pandemic.

“As a result, outstanding loans arranged on gold are expected to increase from Rs 3.44,800 crore (USD 47 billion) in 2019-20 to Rs 4,05,100 crore (USD 55.2 billion) in 2020-2021” , said the World Gold Council (WGC) said in the report, titled “Gold Loans Help India Weather the COVID-19 Storm”.

The gold lending industry has always been a mainstay of support for small businesses and households in need of short term emergency assistance and for the unorganized lending that normally coexists with any gold market robust, said Somasundaram PR, Managing Director of WGC (India).

He added that India’s regulated institutional framework for gold lending has made it ubiquitous over the past decade, which is a boon.

The COVID-19 pandemic has boosted demand for gold loans through banks and non-bank financial companies (NBFCs), and the recent surge has been seen for some time since July 2019, when prices began to rise sharply. . “A 28.8% rise in the price of gold in the domestic market this year and the need for quick credit by small businesses will further stimulate the growth of gold loans after the pandemic.”

Gold loans will not only benefit demand but also supply dynamics as many banks and NBFCs target this product segment due to its acceptable risk profile, he said.

“Major Indian gold NBFCs expect their gold lending AUMs (assets under management) to increase by 15-20% in the current financial year. gold and increased technology adoption make the growth prospects of the gold lending market look even brighter,” he added.

Somasundaram also said the market is expected to grow at an annual rate of 15.7% and reach Rs 4,61,700 crore in 2021-22 from Rs 3,44,800 crore in 2019-20.

The report further states that the gold lending industry forms an important pillar in meeting the financing needs of individuals and small businesses in the country.

Gold is a preferred savings for Indian households as it provides capital preservation, liquidity and source of funding during tough economic times, supporting gold’s relevance as a strategic asset in India.

With the emergence of the pandemic, there has been a clear trend of increasing demand for gold loans from individuals and businesses, he added.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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