According to a few sources, Indian households have reduced their gold consumption in the first FY20. This consumption plunged by fifty-six percent on a yearly rationale to 165.6 tonnes.
A major part of the downfall could be blamed on the coronavirus pandemic, which slashed the demand by seventy percent in June to 63.7 tonnes.
This reduction has been the lowest in the last ten years. The main reasons being the loss of jobs, the slowdown of the businesses, collapsing of small startups, pay cuts, and of course, the spread of infection crossing more than 1.5 million people.
Gold loan business and gold loan interest rate:
Only the festive season has seen a little jump in the gold loan business.
The condition is likely to improve post the Covid 19 pandemic with the arrival of the vaccine and relaxation in ten situations, which would also help to resume and balance the economy.
Even during the coronavirus pandemic, the gold loan business and the gold loan interest rate have been intact, providing aid to many people in their emergencies and medical crises.
A lot of branches of banks and NBFCs we’re opened to extend their helping hands as per the MHA guidelines. The people also actively took gold loans with no problem with the gold loan interest rate to fulfill their needs.
The tech-savvy customers preferred to apply for a gold loan online using online payments and net banking or card options to avoid any delay in the repayment and avoid the penalties as per the banks’ respective schemes and other financing firms.
The old trends:
Initially, almost all of the leading firms and institutions came under the disorganized sector through local moneylenders and pawnbrokers.
The scenario has changed to a great extent. Today, the market is covered and governed by enormous lending organizations, including banks and other non-banking financial companies called NBFCs.
The arrival of such firms, the big network, the loan to value ratio, or the LVR increased up to around 75 to 80 percent.
Lately, the sole institution, the Reserve bank of India, increased this rate to ninety percent.
These firms have now shifted to cater to the demands of their consumers and know them better to provide them better. As known, most of the Indian households have a good material of gold jewelry and ornaments available with them no matter what. It is why most people prefer to use this gold material as a medium to cover up their requirements without selling the precious metal.
Gold loans are the medium through which this could be done effectively and are therefore so popular in the Indian market.
This is the reason why the top firms and lending banks have a much lower gold loan interest rate and affordable EMIs.
Banks have improved a lot in their gold loan products and services.
Since the Indian household is deeply attached to their gold materials, whether it be coins, bars, or jewelry, they rarely liquidate the material unless there is an extreme financial crisis condition. This is why the economic significance of the gold investment is rarely recognized and realized.
Talking about the rural areas, where there is not much awareness and lack of knowledge (for documentation purposes, etc.), people still pledge their jewelry to the local landowners and money lenders, who undoubtedly offer a much higher interest rate with other insecurity factors.
Pathway to digitization:
The covid pandemic has influenced the banks and NBFCs to go digital and encouraged and attracted the consumers to go for distance payments and transactions. These have to lead the way for consumers to apply for a gold loan online.
The coronavirus pandemic has also made it easier to manage the documentation and reduce the cash exchange only because offline methods would spread the infection within the employees and their customers.
The need paved the way for digitalization, with more and more people joining in and adopting the e-lending modules. It includes the customer onboarding, the underwriting work, disbursement, and sharing the documents online through the registered mobile through the medium of WhatsApp or mail id.