Editor’s Note
This article examines the record-breaking surge in India’s gold loan sector, highlighting the economic pressures and shifting consumer behavior driving individuals to leverage their gold holdings for liquidity.
The gold loan sector in India is witnessing an unprecedented surge, with people pledging gold jewelry and ornaments in large quantities to secure loans. This trend has broken all previous records, raising questions about the underlying economic factors and consumer behavior driving this rapid growth.
Financial experts point to several key reasons for the sharp increase in gold loan demand. High inflation and rising living costs have squeezed household budgets, making gold a readily available asset for liquidity. Additionally, the formalization of the gold loan sector by banks and non-banking financial companies (NBFCs) has made the process more accessible and trustworthy compared to traditional informal lenders.
The post-pandemic economic recovery has been uneven, with many small businesses and individuals still facing cash flow challenges. Gold loans offer a quick and relatively low-interest option compared to unsecured personal loans. The stability and high value retention of gold make it an ideal collateral for both lenders and borrowers.
Financial institutions have reported a significant year-on-year increase in their gold loan portfolios. The ease of online applications and doorstep evaluation services have further fueled this growth, especially in semi-urban and rural areas where gold ownership is high but access to formal credit has traditionally been limited.