What is the market outlook that you see in the coming few months with regards to gold, gold loan business and coronavirus? Where are we heading?
By: Shailendra Wade Zonal Business Head : Rest of India, Fedbank Financial Services
As per the current situation and for the near future, Gold loan business will add weightage to all the Bank and NBFC’s balance sheets due to higher focus over customer acquisition. Focused, aggressive marketing or niche product positioning, targeting specific customer will lead to increase in business penetration all over.
Earlier, gold loan was always looked like the retail segment product where only low-ticket size loans were being distributed and acquired by the specific consumption purpose. With time, its outlook has changed and is preferred by business people, entrepreneurs, and MSME segments to use it as short-term bridge loan with varied range of schemes and flexible repayment options like monthly, quarterly and half-yearly.
Gold prices and regulatory amendments have added value to this business. If the prices also get stagnated post couple of corrections, still the business will see uptrend as currently all banks and NBFCs hold only 35-40% of the total Gold available in India by households stocking up to 25000 tones, which is a tentative figure as per WGC. NBFC will always gloom due to dedicated business lines and deep market reach and offers as primary product line for GL NBFCs. The Gold Loan market is expected to reach INR 4617 billion by 2022 at five year compounded YOY growth rate of 13.4% since year 2018. This is growth only pertaining to organized market with Banks and NBFCs. Historically in last 2 years span gold prices which are rising steady and demand also stood up constantly and avail the Term loan/OD facility or bullet payment Gold loans.
Yes not to mention, but some portion of these investments or Gold pledged may also be vulnerable to auctions and loss of asset, but the credit needs are not going to stop. Hence, due to parallel rise of credit demand to restart the business in pandemic disruption, Gold loan business will have growth for the coming year or two.
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