Leading gold non-banking finance corporations (NBFCs) have stated that the traders, shopkeepers, and small business owners will seek gold loans to resume business after lockdown ends. Small business owners use gold loans as short-term working capital for stocking.
Gold prices have surged around Rs.47,000 per 10 gram; on the other hand, small businesses need capital to resume their business operations. Gold loans act as bridge financing as small companies have not received payments during the lockdown. Since they will need money, they are most likely to pledge gold for loans. It is said that about 30%-75% of gold NBFC’s customers are shopkeepers, traders, small business owners, and self-employed individuals, such as carpenters and electricians.
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Due to relaxation in lockdown rules, gold NBFC branches that are located outside COVID-19 hotspots have started functioning says a gold NBFC company. Customers have begun to visit the offices slowly; however, the flow is less as social distancing norms are to be followed. It is assumed that the demand for gold loans may be high in northern, western, and easter India. A 15% growth in gold loan business is anticipated during the financial year.
According to another gold NBFC, it is too early to gauge if the market can attract more customers once the lockdown is lifted as a few branches restarted functioning very recently. The usual 30% business from shopkeepers and small companies may go up by 4%-5% points.
Further, the job loss and pay cuts among other classes of individuals may uptick the gold loans shortly for consumption and family needs.
For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in
