New Delhi: In the first seven months of the current financial year, loans disbursed by banks against gold jewelry have seen a sharp rise of 50.4 per cent, outpacing the growth in other personal loan categories, which largely remained in single digits. According to data released by the Reserve Bank of India (RBI) on Friday, outstanding gold loans stood at Rs 1,54,282 crore as of October 18, 2024, compared to Rs 1,02,562 crore at the end of March 2024.
On a year-on-year basis, this marks a 56 per cent growth, significantly higher than the 13 per cent recorded in October 2023. Factors Driving Growth In Gold LoansBankers attribute this growth to several factors, including a shift from non-banking financial companies (NBFCs) to banks and a preference for secured loans over unsecured ones. During the same period, loans to NBFCs declined by 0.
7 per cent to Rs 1.5 lakh crore. Additionally, the increase in gold prices has played a significant role, allowing borrowers to repay older loans and avail of larger new loans against the same collateral.
Indicator of Financial Distress?Some analysts see the rising demand for gold loans as a sign of financial distress among borrowers. Last month, the RBI directed banks and financial institutions to review their gold loan policies and address any shortcomings within three months. This followed an investigation that revealed irregular practices, including the evergreening of bad loans to hide defaults.
Comparison With Other Personal Loan CategoriesWhile gold loans showed robust growth, other segments of personal loans experienced slower growth. Home loans rose by 5.6 per cent during the seven-month period, with banks' home loan books reaching Rs 28.
7 lakh crore, marking a year-on-year growth of 12.1 per cent -- significantly lower than the 36.6 per cent growth in October 2023.
Credit card outstanding balances grew by 9.2 per cent to Rs 2.81 lakh crore during the period, driven by a surge in online transactions.
However, growth in unsecured loans and other personal loan categories was subdued at just 3.3 per cent. Overall Bank Credit GrowthOverall, bank credit grew by 4.
9 per cent to Rs 172.4 lakh crore in the first seven months of FY24. Credit to the industrial sector also saw limited growth, increasing by 3.
3 per cent. Get Latest News Live on Times Now along with Breaking News and Top Headlines from Economy, Business Economy and around the world..
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Financial Crunch Ahead? Gold Loans Surge By 50% In First Seven Months of FY25
Bank loans against gold jewelry have surged by 50.4 per cent in the first seven months of the current financial year, highlighting a significant rise in this secured loan category. This growth stands out as credit expansion in other personal loan segments, including home loans and unsecured loans, has remained in single digits.