Gold an Investment also a security for loans

Gold is considered as the safest investment by Indians, and now people utilized gold as property rather than ornaments. People also hold it as hedge against inflation. In all cases of emergency gold can be used as an asset security for taking loan at a rate of 12 – 21% while the interest rate on credit card and personal loans is 30-36%. And incidentally gold loan is one the fastest growing business in India.

The price of gold has increased significantly over the year which makes the people could raise a good sum of money by pledging gold. Kerala Accounts for 20% of India’s gold consumption. This makes keralites to effectively use their gold and as security for loan. It is observed that the gold loan business marked a significant growth in Kerala due to the following reasons:

Simple procedure, fast disbursal

Avoid debt trap from local financiers

No depreciation of asset

No formality

It is assumed that about 18 tons of gold is in safe custody of Indian, which amounts to Rs.30 trillion back to economy. The role of gold is surely bound to change from commodity to a monetized asset that would encourage consumers to invest more in gold, a time-tested secure and now a monetized asset class. Traditionally Gold is an asset which is more easy to buy and sell unlike other assets. Even when the price of this yellow metal is on the move, people especially keralites are behind this. A report of World Gold Council shows that in 5 year term, gold investment is the best hedge against inflation at 23-24% in India when compared to BSE Sensex.

Due to its diligence many companies are starting gold and allied industries like Gold Loan, Gold Investment, and Service Centers for Gold Purchase. It is estimated that Indian Gold Loan market is about ` 5.0 Lakh Crore which are mostly shared by unorganized sectors, public banks and some branded corporates like Muthoot, Manappuram etc. These companies are charging floating interest rate varies from 12 - 18%.

Here we are beginning a detailed study of the Gold Loan Industry in Kerala, especially on its operation, regulatory requirements, future of industry, etc.