The situation in India is deteriorating. In the aftermath of the Covid Crisis, households and small businesses in gold’s second-largest consumer nation are borrowing against their jewellery, coins, and other gold items in unprecedented amounts.
As opposed to unsecured personal loans, pledging gold as collateral lowers borrowing costs significantly, allowing poorer households to access the credit they would not otherwise be able to obtain. For Indians, a gold loan is not a novel concept.
From the beginning of finance, it has been the primary source of lending and raising funds. Its origins can be traced back many centuries when it was the primary means of barter and trade. And India was, and continues to be, the world’s largest consumer of gold ornaments, with Kerala and Tamil Nadu topping the list of Indian states.
Gold has a special place in India’s socio-economic culture. It is regarded as a valuable asset, a hedge against inflation, and an immediate source of cash, especially for Indian rural households. Gold is used as a kind of leverage to obtain funds for immediate needs.
Courtesy: Good Returns
