Gold loan outstanding jumps 77% in 12 months up to July, rings alarm bell

Overall, retail or personal increased by about 11.2 per cent in the reported period.

New Delhi: Retail gold loans outstanding jumped by 77.4 per cent to Rs 62,412 crore in 12 months up to July from Rs 35,189 in the previous corresponding 12 month period, signalling signs of financial distress in Indian households.  

Overall, retail or personal increased by about 11.2 per cent in the said period. Notably, retail loans account for 26 26 per cent of total bank credit, according to a report by Indian Express.  

India’s largest public lender, the State Bank of India, noted that the gold loans jumped by 338.76 per cent as of June 2021, with the total gold loan book standing at about Rs 21,293 crore. 

The sharp rise in gold loans hints at how the COVID-19 pandemic has impacted Indian households. The pandemic-induced lockdowns, unemployment and increased medical bills are to blame for the rise in gold loans. 

In such distress, gold loans, which doesn’t require much documentation, especially related to credit score, became one of the most attractive options for Indians seeking to mitigate the impact of COVID-19 from their day-to-day lives. 

During the reported period, credit card outstanding also soared by 9.8 per cent to Rs 1.11 lakh. The swelling of the credit card outstanding figures suggests that consumers are using the borrowing payments mode for their daily purchases. Credit card outstanding had increased by 8.6% in 12 months ending July 2020. Also Read: Samsung develops industry-first '200 million pixels' mobile camera technology

In contrary to retail loans, RBI data suggests that credit to large industries shrank by 2.9 per cent to Rs 22.75 lakh crore. The data signals industries’ non-willingness for making new investments. Also Read: Xiaomi launches Redmi 10 Prime with 6000 mAh battery, 50 MP camera: Price, feature and specs