Gold loans to cross Rs 3 lakh crore by 2020

The report titled “India’s gold loan market: Is the glitter fading?” cites the World Gold Council which estimated last year that average demand in the country would go up to around 850 to 950 tonnes per annum by 2020, with two-thirds of this demand coming from the rural market.

“Industry projections say the organised gold loan market in India will grow to Rs 3,101 billion by 2020 at a three-year CAGR of 13.7 per cent,” a KPMG release said. India is one of the largest consumers of gold, which had an estimated total stock of 23,000 tonnes in 2016, the majority of which is held by households, according to the report. 

“With the country’s growing population and ever increasing disposable income, India’s fondness and inclination for gold has also increased manifold,” the report said. There are two categories of gold loan lenders in India. 

The formal sector consists of banks, NBFCs and cooperatives, while the informal sector is made up of categories like local moneylenders and pawnbrokers. According to KPMG, gold loan companies are expected “to continue delinking the gold price volatility risk by offering more variants of lower tenure loan products”.

The report said the gold loan space is likely to see “interesting partnerships with fintechs (financial technology companies) to help streamline and automate processes.” It has identified factors such as exclusion from mainstream personal and retail loans by commercial banks, and changing attitudes to applying for gold loans, as the growth drivers of the gold loan market in India.