CHENNAI: For many families, gold kept at home is more than jewellery or a symbol of status it is a financial safety net that can be turned into cash when an urgent need arises, although it also turns out to be a form of wealth drain, specifically from a socio-economic perspective, because a significant portion of pledged gold is permanently lost by borrowers due to default and subsequent auctions.
In Tamil Nadu, this role of gold is particularly pronounced, with the state accounting for 32 per cent of India’s gold loans, worth around Rs 6 lakh crore.
The figure places Tamil Nadu at the top in gold loans, according to data released by Motilal Oswal Financial Services (MOFSL) and credit information company CRIF High Mark.
The total value of gold loans in India stands at around Rs 18.6 lakh crore, the data showed.
South India leads the gold drain. Andhra Pradesh is next with Rs 3.10 lakh crore, followed by Karnataka at Rs 1.80 lakh crore, Telangana at Rs 1.60 lakh crore and Kerala at Rs 1.50 lakh crore. Maharashtra accounts for Rs 1.10 lakh crore, while Gujarat and Uttar Pradesh account for Rs 60,000 crore and Rs 40,000 crore, respectively.
The growing reliance on gold loans points to a change in how households meet urgent financial needs. Earlier, people often depended on moneylenders or informal lenders when they needed money quickly. Gold loans from banks and non-banking financial companies now offer another avenue, with simpler procedures and lower interest rates, according to the data even though a significant portion of the gold is lost forever as customers find it difficult to pay higher interest compared with other bank lending rates.
However, for households, this means gold can serve a practical financial purpose beyond its traditional role as jewellery. The growth of the gold loan sector in Tamil Nadu also reflects greater financial awareness and the use of gold as a source of immediate liquidity.
32 per cent of nation’s gold loans are from TN, with other southern states coming next in rank in using gold as a financial safety net, bypassing riskier options