India’s gold loan boom might run into an uncomfortable question. How much of the growth reflects genuine demand for credit, and how much is helping financially stretched borrowers stay afloat? Banks and non-banking financial companies (NBFCs) have expanded lending against jewellery at a blistering pace, drawn by rising gold prices and the security of a tangible asset.
However, a surge in gold loans may partly reflect borrower stress, with lenders allowing customers already in deep delinquency to borrow against gold and repay overdue loans, Macquarie has said, as per a TOI report. Fresh warnings from Bajaj Finance and Piramal Finance, too, suggest that some borrowers are pledging gold even as they struggle to repay loans elsewhere.
