Gold Loan Segment In India, 2021: The Growth Trajectory

The gold loan segment in India is a very popular loan option for borrowers. One important reason is it is very important to apply and get approved for the loan. It is an easier option and not as time-consuming as other loans.

During the pandemic as people encountered sudden job loss, lesser wages, they required immediate liquidity, to meet medical purposes and other related issues. As gold loan is an easier and faster process, borrowers have shown much interest that helped the sector to grow dramatically over the past 1-year. The enhanced price of gold in the last 2 quarters of FY 21 also helped it much.

RBI shares data on the overall sectoral growth

The Reserve Bank of India (RBI) stated in its report on 'Sectoral Deployment of Bank Credit - June 2021' that the overall loan segment grew because of the faster growth in the 'loans against gold jewellery' and 'vehicle loans'.

According to the RBI report titled 'Statement 1: Deployment of Gross Bank Credit by Major Sectors', loans against gold jewellery (Outstanding) was Rs. 62221.07 crore as on 18th June 2021 and till 26th March 2021 it was Rs. 60725.60 crore. It was found that the gold loan segment actually boomed during the last one year. The same statement by the central bank declared - till 27th March 2020 the loans against gold jewellery (Outstanding) was Rs. 33308.49 crore. Till 19th June 2020 the figure was standing at Rs. 34266.74 crore. So, the overall gold loan sector actually saw a boost gradually, since last year.

Muthoot Finance has seen spur in Q1 FY 21

Muthoot Finance, one of the leading NBFCs in India on the sector, gained Rs. 27137.99 millions in the Q1 FY 22 (June quarter) as total revenue which stood at Rs. 28238.54 millions it its previous quarter that is Q4 FY 21 (March quarter). So, the NBFC saw Rs. 1100.55 millions less profits in the June quarter than its earlier quarter. However, the June quarter saw a Rs. 3287.16 millions better profit on a year-on-year basis.

Loan assets were Rs. 52614 crore in the June quarter in 2021 compared to Rs. 41296 crore in the same quarter during 2020. This marked a growth of 27% year-on-year. During the quarter, gold loan assets inflated by Rs. 142 crore. Its Stage III Asset - on Gross Loan Asset percentage as on 30th June 2021 was 3.67%. Muthoot Finance also reported a 14% increase in consolidated net profit for the June quarter in 2021.

This data shows overall growth in the gold segment till June this year. It is yet to analyze how the later quarters of this year will perform with the changes in gold prices and lower low Loan To Value (LTV).