Falling gold price is forcing loan companies to reduce tenure and seek more collateral

Business

oi-Roshni Agarwal

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Amid the decline in nationwide gold prices to levels of Rs. 44,910 per 10g, gold finance companies are seeking more collateral and reducing the tenure.
In addition, some of the financiers, including the larger ones such as Muthoot Finance, encourage borrowers who make frequent repayments, say monthly. In addition, to prevent any risk, gold lending companies disburse loans well below the authorized limit, i.e. 75% of the value of the metal for shadow lenders and 90% for conventional lenders. until March 31.

Falling gold price is forcing loan companies to reduce tenure and seek more collateral

Falling gold price is forcing loan companies to reduce tenure and seek more collateral

In addition, the term of the loan has been sharply reduced from 270 days to 90 days.

In the past year, there has been a record increase in gold lending as companies to overcome the coronavirus crisis pledged their family’s gold. As a result, loans on the outfit have increased by 25% and the company’s gold holding stands at no less than 146 tons, which is higher than the official reserves of Singapore and Sweden.

“People are sentimental about their jewelry,” said George Muthoot Alexander, Managing Director of Muthoot Finance. “They will never want to default despite a drop in gold prices as they intend to get their promised adornments back.”

Gold posted its first quarterly loss in over 2 years as signs of an economic recovery became imminent and demand for ETFs declined further. In India, gold is trading visibly near its one-year low. And now, in the midst of the economic recovery, investors are trading safe havens for investments that could explode amid economic resilience, such as stocks and even bonds, as there has been an increase in bond yields.

The risk that emanates and worries lenders on the ground is in the midst of a resurgence of Covid 19, even the most diligent of repayers can falter and fail to repay.

GoodReturms.in

  • Will US CPI data at 5.3% push gold prices down?
  • Gold rate in India trades at Rs. 46,000 on September 14, down slightly
  • Importing gold to India: rules, entities, taxes
  • Gold rates in India fell slightly on September 13
  • Is the fall in gold prices still a good hedge against inflation?
  • The price of gold is quoted at Rs. Rs. 46,070 on September 11
  • Why should you choose gold ETFs? Benefits and privileged funds
  • Indian gold rates rose slightly on September 10
  • Indian Gold Rates Falling, Should You Buy Before the Holiday Season?
  • Gold Rates Drop Rs. 120 September 9, India
  • Indian gold rates fell from Rs. 290 on September 8
  • Gold prices fell by Rs. 120 on September 7th in India

Article first published: Monday April 5, 2021, 4:41 PM [IST]

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