Context:
Bank’s gold loan portfolio rose 71.3% YoY to ₹1.72 trillion as of December FY25, while growth was seen at 17% last year. This has come on the back of the sky-rocketing gold prices and decelerating unsecured loans, with an RBI increased risk weightage on the same.
Gold Loan Portfolio
A gold loan portfolio is the aggregate of gold backed loans given out by a financial institution. Such loans ensure rapid liquidity to borrowers while at the same time guaranteeing security to lenders by pledged gold assets.
How Does a Gold Loan Work?
- The lender examines the gold’s purity and market value.
- The lending institution sanctions an amount, normally up to 80% of the gold value.
- The gold loan amount gets disbursed promptly or within days.
- The amount borrowed is repayable in installment or in whole amount within tenure agreed upon by both parties.
Gold Loans Advantages
- Highly prompt sanctioning and disbursal with minimal formalities.
- It has lower interest rates than personal or unsecured loans.
- EMI based or bullet payment structures are available. .
- No credit history is required.
- It helps to improve the credit score if paid on time.
- It allows borrowing cash while keeping the gold secure with the lender.
Why Add Gold to Your Investment Portfolio?
- Gold is a hedge against inflation, keeping the purchasing power.
- It is a safe haven asset that prices increase when there are economic and geopolitical uncertainties.
- It offers diversification, thus reducing the risk of investment in general by evening out the portfolio volatility.
