Borrowers could not repay by taking gold loan: now notice issued for gold auction; Considering so many auctions together as a sign of financial crisis

Not repaying on time by taking gold loan will cost about one lakh families. Actually, NBFCs and banks giving gold loans are going to auction gold on Wednesday. Gold loan NBFCs Muthoot Finance and Manappuram Finance account for more than half of the organized gold loan market. These are families who took loans by pledging gold, but could not repay it on time.

Gold loan is given against gold ornaments. Loans are available up to 70 per cent of the cost of the jewellery. In this case, the easier it is for the borrower to get the loan, the easier it is for the lender to recover it. On default, he sells the gold and recovers the loan. NBFCs and banks conduct gold auction every month. For this month, so far 59 auction notices have been issued in one and a half dozen cities.

Gold loan is a type of secured loan. Your CIBIL score does not matter in this. This loan is easily available and at a lower interest rate than a personal loan.

In this, gold auction of more than one lakh defaulters will be held on February 16. Sucheta Dalal, founder of Moneylife Foundation, an organization working on investor awareness, says that during the Corona period, lakhs of people lost their jobs or their business was ruined. Such people took a loan by pledging gold, but are unable to repay it. This is such a financial crisis that is not visible.

Data from the Reserve Bank of India shows that the trend of gold loans increased rapidly in the country during the Corona period. January 2020 i.e. just before Kovid, the total gold loan size of the commercial banks of the country was Rs 29,355 crore. It has increased two and a half times to cross 70,871 crores in two years, which is more than the total education loan disbursed in the country.

The lending company has the right to sell your gold if the loan is not repaid on time.

The total loan portfolio of Muthoot Finance, the country’s largest gold loan company, has increased from Rs.39,096 crore to Rs.61,696 crore during this period. Sucheta Dalal says, gold companies play with people’s emotions. It is better to sell the gold in trouble and pay interest by pledging the gold and when the situation is right, then buy the gold. Those whose gold is auctioned, assets like gold come out of their hands at throwaway prices.

The average size of a gold loan in the country is Rs 70,000 and the average tenure is only 4 months. Dainik Bhaskar reached out to Muthoot Finance regarding the massive auction, but a company spokesperson declined to comment saying that we do not talk about auctions. However, a senior NBFC official admitted that the auctions have increased manifold in the last few months. Due to this, it is becoming difficult to find buyers in some cities.

sell gold under compulsion
Economist Prof. As Arun Kumar says, people take loans only when they have a financial need. Many people lost their jobs and jobs in the second wave of Corona. A lot of money was also spent on illness. Price’s survey shows that compared to 2016, the income of the lower strata of the country has fallen by 60 percent. This section takes maximum gold loan. Now due to lack of income, they are unable to repay the loan. This shows the financial crunch at the micro level.