The recent surge in gold prices is bringing some cheer not only to investors but also to the borrowers.

As a result of increasing value, some borrowers are now able to get at least 20 per cent higher loans than what they used to get about two to three months ago, say experts.

“The increasing price of gold is helping both the borrowers as well as the lenders,” Mr George Alexander Muthoot, Managing Director of Muthoot Group, told Business Line here on Monday.

If a person was getting a loan of Rs 10,000 earlier, the loan amount now is about Rs 12,000, Mr Muthoot said. For lenders too, this would provide stronger collateral, he added.

The main beneficiaries are small borrowers, says a functionary of Manappuram Finance.

“Those who take gold loans to meet emergency purposes are happy as they get more money. But there also others who simply do not go for a higher loan just because they can get it,” he said.

The higher gold value would also make borrowers ‘more cautious' about repaying loans and get their gold back.

While non-banking finance companies are faster in linking loans to market price, banks are still cautious.

“We are examining the feasibility of higher valuation of gold for loans in view of the increasing price,” a senior official of State Bank of Hyderabad said.

Mr Anil Girotra, Executive Director of Andhra Bank, said: “We have not yet revised the loan amount per gram and are in the process of ascertaining price trajectory.”

In general, banks are now giving Rs 1,400 as loan for a gram of gold as even NBFCs are taking the lowest value of gold in the preceding month as base per valuation.

Of late, gold loans have become very popular with over 1.2 lakh gold loans being sanctioned every day by banks and NBFCs, according to a market estimate.

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