Be it farmers in the countryside, working women in the city, parents looking for temporary finance or UMKM entrepreneurs looking for quick working capital, gold loans can meet the needs and aspirations of all. | Photo Credit: The Hindu
Shripad Jadhav
“The desire for gold is not for gold. It is for the means of freedom and profit.”
Poet Ralph Waldo Emerson’s reference to mankind’s eternal desire for the yellow metal perhaps sums up the Indian mood today. The financial freedom that gold offers, the eternal safe haven, and the ability to fulfill immediate desires has led to more and more Indian households turning to the precious metal for loans.
Be it farmers in the countryside, working women in the city, parents looking for temporary finance or UMKM entrepreneurs looking for quick working capital, gold loans can meet the needs and aspirations of all.
The intrinsic value of gold tends to withstand economic fluctuations, making it a reliable asset for borrowers and lenders. According to a report by the World Gold Council, Indian households have a record 24,000 tons of gold reserves, and even a small percentage that enters the formal economy can add economic value.
Indian women who hold gold as an important part of their savings and respectable investments can also use the power of the metal to fulfill their entrepreneurial ambitions. While urban women are relatively advantaged in terms of financial prowess, rural women can creatively use gold as a source of funds to improve their livelihoods and income levels. Here, gold loans can empower women entrepreneurs in an easier way to access capital to start or expand their business, with more flexibility.
Whether creating small businesses such as papad making, sewing units, dairy farms or handicrafts, women can use gold loans to achieve their entrepreneurial dreams or invest in their children’s education, adding value to their household income as well as their family’s future.
Rural India has been fancying gold for generations. According to the latest data, rural areas account for almost 60% of the total consumption of the yellow metal, which is considered the most reliable asset and help in times of financial crisis. In this context, gold loans have emerged as a powerful instrument to strengthen the rural economy in India. By leveraging the intrinsic value of gold assets, these loans provide much-needed liquidity, stimulate entrepreneurship, and contribute to overall community development. However, many rural areas in the country still continue to deal with unorganized and unregulated gold loan providers including loan sharks, losing precious gold in the process.
Ideally, gold loans are a fast and reliable option that can allow farmers to increase their productivity and increase the value of their agricultural assets. By using gold as collateral, farmers can access cost-effective funds to purchase seeds, fertilizers, machinery, and other inputs needed for their farming operations. By using gold ownership, farmers can increase yields, increase profits, and diversify agricultural activities, use modern agricultural techniques and implement them, thus reducing the vulnerability to selling products and increasing cash flow.
Maintain wealth
Gold has enormous cultural and social significance in Indian society, often passed down through generations as heirlooms or part of religious rituals and ceremonies. There is emotional connection and ancestral affinity. Not surprisingly, an Indian family is believed to have the largest private stash of the yellow metal in the world – worth $2 trillion. Gold loans are designed with that sensibility in mind, allowing individuals to retain ownership of their gold assets while providing them with the liquidity they need when they need it. This ensures that the cultural heritage contained in gold can be preserved and passed on to future generations even as it provides a source of financial security. and empowerment for rural households.
Furthermore, one of the key features of gold loans is flexibility in repayment options. Borrowers can choose a repayment schedule that aligns with their cash flow cycle, making it easier to manage their debt obligations without unnecessary stress. This flexibility ensures that borrowers can repay their loans comfortably, reduce the risk of default and develop a culture of responsible lending and borrowing.
Moreover, the transformative impact of gold loans extends beyond the individual borrower to the wider community. As businesses prosper and incomes rise, the local economy experiences a ripple effect of economic growth and development. Increased economic activity has led to the creation of jobs, better infrastructure, and better living standards for rural residents. Gold loans play an important role in accelerating community development and promoting inclusive growth in rural India.
And in times of economic crisis, rural communities are often the most vulnerable, facing challenges such as crop failure, mounting debt, and reduced income opportunities. At these intersections, gold loans provide a source of stability and resilience, providing individuals and businesses with the financial resources they need to weather the storm. By tapping into gold assets, rural households can withstand economic shocks, save their livelihoods, and become stronger against adversity.
Today, gold loans have emerged as a transformative tool for economies like India, providing much-needed liquidity, stimulating entrepreneurship, and supporting communities. Because of the huge reserves, the potential is too much to ignore; Indian households owning 27,000 tonnes of gold (14% of world holdings) have pledged only about 5,300 tonnes. According to the CIBIL survey in December 2023, the gold loan industry progressed to ₹7.15 lakh crore, having grown at a CAGR of 19% in the last three years.
Due to the freedom and benefits offered by gold loans, Indian households can find it as the right product to fulfill their desires and aspirations.
(The author is President, Retail Agriculture and Gold Loans, Kotak Mahindra Bank Ltd.)
