Pledging Gold For Loans

Gold is often seen as an auspicious asset in India with good gains and acts as a safe haven during crisis. With pandemic looming large, the yellow metal has seen a sudden spike in demand. Tapan Patel, Senior Analyst, Commodities, HDFC Securities explaining the reason behind the picking up demand for gold-backed loans, says: “There are two reasons which are driving the rise in demand of gold-backed loans in India- one, gold prices are going high and secondly, there is a liquidity crunch in the market due to COVID-19 induced pandemic.”   These are secured loans where gold articles are taken as collateral by the lending bank or NBFC. The loan is given to borrowers against gold as a collateral. The tenure of the gold varies with every lender and so do interest rates. India’s largest lender SBI is offering gold loans at an interest of 7 to 7.50 per cent with the...