Banks join NBFCs in gold loan race

Though bank credit offtake is yet to pick up in a big way,the gold loan business giving loans to customers with gold as collateral is thriving,attracting more players in the lending space. After seeing the success of non-banking finance companies (NBFC) in this business,both pubic sector banks and private banks are now aggressively entering into the area.

Major players like Manappuram Finance and Muthoot Finance have seen a growth of 25-30 per cent in the last two months. ICICI Bank,HDFC Bank,State Bank of India,Andhra Bank,Central Bank,Allahbad Bank and Canara Bank have started aggressively pitching for the gold loan business at interest rates much lower than they charge in personal loans. More banks are planning to enter the segment. “This year,we have projected a five-fold growth in loan disbursement. Currently,60 branches of the bank provide the gold loans. We are planning to involve all the branches of the bank for the business by June,” said M Anjaneya Prasad,general manager (Mumbai Zone) of Andhra Bank.

Gold has of late gained prominence as an invetsment avenue and high prices. With NBFCs giving a tough competition,some banks are even offering up to 90 per cent of the value of gold with a limit of Rs 10 lakh. “Gold for loans by banks is a positive gesture which will infuse greater confidence in gold as an asset class. It depends how banks outperform the NBFCs. With banks entering gold bar business,availability of infrastructure for storage,and with medallions being accepted for securitisation purposes,the role of gold is surely bound to change from a commodity to a monetised asset that would encourage consumers to invest more in gold,” said Ajay Mitra,managing director(India),World Gold Council.