High prices encourage gold buyers to redeem and resell, obtain liquidity
Chennai: For Vijay Kumar, 45, who runs a travel agency, the business has been hit by Covid, with cash flows completely eliminated and lenders lining up. It is an existential crisis and every rupee that comes in is welcome.
He took a very short-term bridge loan to pay off his gold loan. Upon recovering it, he sold the gold, paid off the bridge loan, and also pocketed some money.
As gold prices rise, gold lenders are seeing more and more cases of clients coming to pay off old promises, only to sell jewelry for a higher value and take home some money.
Yes, with the price of gold rising to all-time highs in India, we have been seeing cases of clients choosing to redeem their promises to sell the jewelery for scrap metal and take advantage of these record prices, said Vice President Nandakumar, MD&CEO, Manappuram Finance, one of the great lenders against gold.
Although no new clients were acquired during the closing period, we did see the momentum with repayments and renewal of gold loan promises through our various digital channels, including the online gold loan platform (OGL) , said. Manappuram Finance has reopened 80% of its branches now.
George Alexander Muthoot, MD, at India's largest gold lender, Muthoot Finance Limited, said: We see many clients come forward to pay off their old loans after the blockade was lifted. Once the gold loan is closed, clients are free to handle the jewelry the way they want. The tendency to sell the promised gold jewelery after redemption is definitely possible. ”
Muthoot Finance has 78% of its branches currently open and operational. They have seen more footfalls in the past five days at their Bengaluru-based branches, as well as increasing inquiries about gold loans.
While more money is now available for every gram of gold pledged, the loan to value remains between 60% and 75%, while the mandatory limit is 75%.
Regarding the new loans, Nandakumar from Manappuram said that with the rise in gold prices, clients find that lending against gold is easier. However, for additional loans, the company insists on closing the existing loan.