There is a significant growth in the demand for gold loans in the post-lockdown period. It is because, during the lockdown period, it was challenging to get unsecured loans.
It created a demand for the customers to shift more towards the gold loan. The is a rapid demand for gold loans than the pre-COVID times.
Gold loans are now much-in-demand:
Expansion of small business: The Muthoot Fincorp is part of Kerala’s Muthoot Pappachan group. It is based in Kerala. During the lockdown phase, people have been through a lot of financial crises, after the lockdown they wanted to work on their micro and small businesses which is why they were keen to secure the Gold Loans.
Muthoot Fincorp, one of the major player in the gold loan market, has witnessed increases in gold loan demand during a pandemic.
Expected growth: It is observed that the Assets Under Management (AUM) was Rs.22,441 Crore as of March, 202o. A 23% growth is expected for the Gold loan business. It will also be made sure that the AUM remains unchanged for the next three financing businesses. The funding of Muthoot Fincorp comes mainly through NCDs, CPs as well as bank borrowing.
Increasing demand for two-wheelers: Another important observation is that the sales for two-wheelers have been increasing after the lockdown. People are very much reluctant to use public transport in fear of the spread of the diseases and the social distancing norms. Therefore, people want to own their own vehicle to travel to work and other places as they feel like it is a more secure option during the pandemic. A good monsoon is also a factor that increased the two-wheeler sales.
Expansion through new branches: The Fincorp is looking forward to opening new branches. More emphasis will be given to the northwest and east. They have also procured the license to open a few branches. Their targets will be met soon.
Hospitality and power: There are various other businesses within the Muthoot Pappachan Group, but they only constitute as less as 4% of the revenue. They exclusively provide services on hospitality, commercial, and housing real estate. It is believed that some time would be needed to revive the hospitality sector, but it will be revived soon as leisure travel begins.
Along with the gold loans, Muthoot Fincorp has strategically planned for its other verticals to deal with the effects of the pandemic as discussed above.