InvestorQ : Why is the gold loan market expanding rapidly in India and what does it mean for stocks like Muthoot Finance and Manappuram Finance, the gold loan players?
Arti Chavan made post

Why is the gold loan market expanding rapidly in India and what does it mean for stocks like Muthoot Finance and Manappuram Finance, the gold loan players?

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Rutuja Nigam answered.
3 weeks ago
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As per the latest data put out by the World Gold Council or the WGC, the Indian gold loan market is expanding rapidly. This market has specially got a big boost as part of the post-COVID recovery as families and businesses try and get back into normal action.

The gold loans business is expected to touch a level of Rs.460,000 crore by FY22. The current size of the organized gold loan market in India is $47 billion and this is expected to grow at around 16% annually in the next few years.

It must be remembered that the gold loan companies not only benefit from the growing market but also from the existing unorganized gold lending getting into the mainstream gold lending business of banks and gold finance companies that are better regulated.

One trigger has been the post-COVID recovery. In the aftermath of COVID, there was a huge demand for gold loans as normal loans linked to credit standing were not easily available. This problem was a lot more pronounced in the case of individuals and MSMEs.

As a result, the action shifted to gold loans as CIBIL score does not matter too much in the case of gold loans, being a secured loan. This has boosted the profits of gold loan companies in India as well as the banks. The first big step is to make the gold loan market organized.

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