“There is clearly an awareness among people that gold loan is a smart loan and that it can unleash value which can be used for productive activities including improving one’s lifestyle. It is being looked upon as a cheaper, faster and a smarter option. This is in sharp contrast to the earlier perception that gold loans are taken during crisis by those economically deprived,” said Mr George Alexander Muthoot, managing director, Muthoot group.
He claims that the interest rates being offered by NBFCs are comparable to those being offered by nationalised banks....
Typically, gold loans are taken for three-to-six months and the average ticket size is in the Rs 20,000- 25,000 range. Industry sources claim that only 2 % default in their payments. “Nearly 80 to 90% of their customers are repeat customers as they have no reasons to worry about safety of their pledged gold kept in our safe deposit vaults,” a source said.
Indiabulls Financial Services is looking to introduce a scheme where a physical market player of gold and silver would be provided with funds for a short term. Indian Commodity Exchange CEO Sanjay Chandel said, “It would be a temporary funding arrangement and might be akin to what other institutions are offering.”
It's interesting to see the trend grow and spread, as similar loans might make inroads into North America some day.