Shriram City Union Finance Ltd has announced the launch of its gold loan product in seven northern States as the Shriram Group company eyes nearly four-fold growth in gold loan disbursements in the next five years.
To support its growth objectives, the company has introduced the gold loan scheme in 70 branches in Punjab, Rajasthan, Haryana, Himachal Pradesh, Jammu & Kashmir, New Delhi and Uttaranchal. The company has a strong gold loan franchise in southern India and aims to replicate the success in the northern region, according to a statement.
“Our gold loan book as of December 31, 2021, stood at ₹4,110 crore. We will target growing the gold book to ₹15,000-20,000 crore over five years. In South India, we have a strong franchise for gold loans, and the majority of our business comes from this region. We will replicate in the North the best practices that have worked for us and look at profitable growth Pan-India,” said YS Chakravarti, MD & CEO, Shriram City, said.
Demand for gold loans has risen over the last two years, where Shriram City’s portfolio has contributed 13 per cent of the AUM as of December 2021 against 10 per cent in the previous year. Overall, gold loan disbursals have seen a healthy growth of ₹4,610 crore in the nine months of FY22 compared to ₹4,140 crore year-on-year, indicating better trends in FY23.
Interestingly, the perception of taking a gold loan is slowly changing, and gold loans are also emerging as an all-weather loan. Today, gold loan as an asset class is one of the most convenient resorts to avail easy credit to address the immediate financial requirements of individuals/businesses, he said.
Gold loan ticket size
Going forward, the company is targeting an average gold loan ticket size in the range of ₹ 50,000, with limited Loan to Value (LTV) at 75 per cent, leaving the scope of the marginal requirement for additional margins in times of adverse gold price fluctuations.
Over a period, the company has seen the life of its loan in the range of 5-6 months despite the usual tenure norm of 12 months, reflecting the borrower’s propensity to repay.