Disadvantages Of Gold Loans

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Loans not only forms an important source of revenue for banks and other financial institutions, but they also add to the economy. The most recent of them being is Gold loans. Gold loans are amongst the newest class of assets which have seen rapid growth in securitisation. Gold has been a valued commodity for a pretty long time, particularly in India where it is considered highly valuable and auspicious and has been in use for centuries in the form of jewellery, coins and other assets. Gold being a highly liquid asset, it has been recognized as a product that can be leveraged by consumers to meet their liquidity needs effectively.
In India, it is believed that most of the gold is held by people in rural areas and in many cases this is the only asset they have in their possession though in small quantity by which they can easily raise cash from moneylenders due to unavailability of banking facilities. Opting for gold loan can be broadly classified into status based, demographic based and age based segments. After analyzing the market, we came up flow chart explaining the various channels along with a …show more content…

Gold loans have become a basis for creation of new financial products wherein gold is purchased on the date of loan and held as a pledge until the equated monthly instalments are being paid. The concept of gold loans is not a new phenomenon to the Indians. Lending against gold has been in vogue since the very inception of the process of lending. The origin dates back to centuries when it has been used as the main commodity of exchange in the system of barter and trade. The same holds today for the fulfilment of short term financial requirements Gold is presumed to be a safe haven in times of economic uncertainty, a fact exemplified by a 30% increase in the value of gold over the past

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