Gold loan market to be of Rs3,101bn
Organised gold loan market to grow at
a three year CAGR of 13.7 per cent by 2020
the KPMG report titled ‘India’s gold loan market: Is the glitter fading?’. This KPMG publication provides an overview of the Indian gold loan industry and covers all components of the gold loan as a product and as a portfolio. Through the coverage on operational aspects and technology possibilities, it provides a new dimension of this product along with implications on India’s financial inclusion targets.
The report gives projections based on extensive research and analysis, and also shares a futuristic digital operating model that can be adopted by the industry with appropriate regulator mediation. Some of the key highlights of the report says:
Industry projections say that the market will grow to INR 3101 billion by 2020 at a three year CAGR of 13.7 per cent. Gold loan companies are expected to continue delinking the gold price volatility risk by offering more variants of lower tenure loan products.
Increased competition from Small Finance Banks (SFBs) reduce the yield and players should invest in technology and automation to a great extent. The space is likely to see interesting partnerships with fintechs to help streamline and automate processes.
Growth drivers for gold loan:
1: Exclusion from mainstream personal and retail loans by scheduled banks
2: Economic correlation
3: Changing attitudes towards applying for gold loans
4: Geographical demands
5: Existing gold held by rural communities
6: Availability of gold loan in extremely flexible terms
7: Supply side: Lower default rates
The report also further discusses the evolution of the gold loan NBFCs, operational landscape, leading industry practices, key regulatory measures and other initiatives, financial inclusion agenda: gold as an incentive, key challenges faced by the industry, technology as a growth lever (innovations in product lifecycle, emerging fintech landscape in India, digital based data-driven credit products for the future).
The report shares a unique proposition for centralized storage and digital gold – A model which is a ‘centralised gold locker unit’ where one can securely park gold and obtain a secure digitized gold certificate post appraisal.