IndusInd Bank will soon offer gold loans to diversify its portfolio, said Romesh Sobti, Managing Director and Chief Executive Officer.
“Gold loan is a critical product in the Indian context and, for many borrowers, it has emerged as a great way to raise short-term capital in an expeditious manner,” Sobti told Business Line .
According to Sobti, with less than 2 per cent of the country’s gold holdings being used as collateral for availing loans, any gold loan product has huge potential.
“Pledging of gold ornaments and assets to local money lenders and pawnbrokers has been in vogue in India for centuries. Now, this business is gradually moving to the organised sector. The objective is very clearly to unleash the potential of the gold saved across households in the country,” he said.
Competition
Despite the presence of established players such as Mannapuram Finance and Muthoot Finance, Sobti feels there is enough space for other financial intermediaries to enter this segment.
“Our entry is driven by customer needs. We see this as a strong growth area for the future. It creates a diversification of our assets,” he said.
India is one of the largest markets for gold, accounting for about 10 per cent of the total global gold stockpile.
Villages hold 65 per cent of India’s accumulated gold, mostly in the form of jewellery.
It is estimated that 20,000 tonnes of gold can be brought into the banking system through gold-linked products. “We are watching the space with a great deal of interest and will surely leverage any opportunities that emerge when such products are structured out,” he added.