Gold loan demands are expected to spike after the lockdown
“Gold loans and Pledging of gold is expected to increase across states with the gradual relief in lockdown restrictions,” according to Umesh Mohanan, Executive Director and CEO, Indel Money, a Mumbai-based NBFC (Non-Banking financial corporation).
He explained that customers are strapped for cash to honour committed outflows. The virus has been deadly this time with a rising infection rate, caseloads, and d number of deaths, causing people to borrow more.
All these have added to the financial sufferings of the common people, he added.
The expectation for gold loan demand is positive and the demand will be fuelled by healthcare requirements, pandemic-driven uncertainty and anxiety, the limitations of the banking sector to serve gold loan demand at an earlier pace due to lower gold prices, and the end of 90 per cent LTV lending on last March 2021, apart from improved credit crunch due to the prevailing policies.
Our gold loan book has registered around 40 per cent growth in FY20-21. We expect around 50 per cent-plus growth in FY21-22, thanks to our expanded geographical existence.
The branches in locations with reduced restrictions on movements have noticed bigger pent-up demand in comparison to last year. The industry has been evolving at over twenty-five per cent.
Gold loan demand is predicted to spike after the lockdown and the post-lockdown demand growth is expected to overtake growth registered during the post lockdown period last year.
At this point when cash flow is restricted for the common buyer the facility to keep their gold life by remitting interest and continuing at their original LTV would be a better option than the short-term loans.
The consumers have to settle interest along with principal within a brief period, and correspondingly re-pledge at relatively lower LTV. This will result in a huge cash outflow for the customer, in comparison with the longer-tenure schemes.
Plans for the company
Planning to explore various options such as capital injection by the group holding company, raising funds through public NCDs (Non-convertible debentures), and PE/VC placement for our expansion.
Have recently opened twenty-five branches across Andhra Pradesh and Telangana. We also have proposals to enter Maharashtra and Gujarat with our conventional brick-and-mortar format by Q4 FY21-22. Also intending to set up a support help hub in all major cities to spread our doorstep gold loan facility which functions through the network of virtual branches.
We are intending to launch pre-paid cards. Our disbursals are fully automated because of our tie-ups with banks through our applications (apps). Existing customers can use our portal or mobile app to extend the exposure of the gold pledged with us based on the prevailing LTV.
Will set up an automated process in which customers can manage the credit line according to their priorities.
We are also intending to enhance our online gold loan facility to take the branches to the homes of customers as the upper segments of MSMEs are not comfortable visiting gold loan company branches during the gold appraisal process.