In case of any sudden emergency or any big need, people often resort to loan. When such situations arise, many people turn to gold loans, due to which a huge market for gold loans has been created in India. The gold loan market is continuously expanding and the farmers of the country also have a big contribution in it.
The market is going to be so big
Domestic rating agency ICRA has recently prepared a report on the gold loan market. Many interesting things related to gold loan are revealed in that report. Like ICRA says that the gold loan market in India will cross Rs 10 lakh crore in this financial year. The size of the gold loan market is expected to increase to Rs 15 lakh crore by March 2027.
Only organized gold loan data
This estimate of ICRA is only about the organized gold loan market. Organized gold loan means such loans in which people take loans by pledging their gold with banks or NBFCs. Apart from this, there is also a big market for unorganized gold loans, which includes loans taken by pledging gold with local bullion traders or moneylenders.
Banks are ahead on the strength of farmers
ICRA’s report shows that farmers have a major stake in this huge market of gold loans. Farmers are especially pledging gold in banks and taking agricultural loans. Due to this, the role of banks remains most important in the organized market of gold loans. Apart from banks, NBFCs are getting help from retail gold loans.
Why do people like gold loans?
Actually there are two types of loans, secured and unsecured. When an asset is pledged in exchange for a loan, it is called a secured loan. Many people prefer to take a secured loan because the interest rate is lower and the loan amount is higher. While giving secured loans, banks usually pledge assets like gold, securities, property. This is the reason why people find it easier to take a gold loan when they need it. The loan amount is decided based on the market value of the gold being pledged. Up to 75 percent of the market value is available as loan.
This is how the gold loan market is growing
An RBI report shows that gold loans, especially loans taken against the pledge of jewellery, have increased significantly recently. In the current financial year, there has been a huge increase of 29 percent in gold loans taken against jewellery. This figure is till July. During the one-year period from July 2023 to July 2024, there has been a huge increase of 39 percent in such loans on an annual basis. Talking about agricultural loans taken against jewellery, it has seen an annual increase of 26 percent during the financial year 2019-20 to the financial year 2023-24. This shows that in recent years, farmers have taken more loans by keeping their household jewelery with banks.
Also read: Effect of record rise in gold prices, Indians took gold loan by mortgaging 53 lakh kg of gold.
