NBFC’s gold lending assets are expected to grow 15-18% this year

Demand for gold lending is expected to increase as economic activity recovers after the blockade is gradually lifted. According to CRISIL, gold loan assets of domestic financial companies are estimated to increase by 15-18% in the current fiscal year.

Demand from individuals, especially to meet urgent personal requirements, and demand from micro-enterprise for working capital to reopen businesses will drive the growth of gold loans.

Gold loans are preferred because non-bank financial institutions (NBFCs) and banks have tightened underwriting standards for other loans. Higher average gold prices also mean that gold mortgage assets under the control of NBFC could increase by 15-18% this year.

Growth was flat in the first quarter of the year as spending was low in April and May due to the national blockade. Krishnan Sitaraman, Senior Director of CRISIL Ratings, estimates that gold lending at NBFC has more than doubled in a row in the second quarter of the year, including re-pledges.

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Unlike other asset classes, gold loans do not face major problems in collection and payment, or loan re-pledges, except in the strict blockade stages of April and May.

New payments, especially to the MSME and unsecured loan segments, remain low, as many NBFCs face recovery challenges and can increase delinquency. As a result, gold loan lenders are expected to make a profit, he said.

According to an analysis by Gold Loan NBFC, for a typical 12-month loan product, 60-65% of the loan will be seized within the first 6 months. Short-term holdings of most gold loans, partial foreclosure options, and associated rebates offered by NBFC make NBFC a convenient option.

Rating agencies are offering online updates from larger NBFCs, as they already own the various forms of gold that are the underlying assets to provide a smooth re-insertion process during a pandemic.

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NBFC’s gold lending assets are expected to grow 15-18% this year

Source link NBFC’s gold lending assets are expected to grow 15-18% this year

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