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Gold loans by NBFCs grew 20% in 2020 amid COVID-19 pandemic

Escalation of gold prices, risk aversion by banks among the factors. Muthoot Fincorp, one of the leading gold loan NBFCs, saw a 28 percent growth in 2020, the highest in the last few years.

May 24, 2021 / 07:02 PM IST

Aided by an uptick in gold prices, non-banking financial companies (NBFCs) extending gold loans have notched up double-digit growth last year by providing easier means of finance when COVID-19 cramped the economy and raised unemployment.

Though official figures are yet to be released, most of them estimate an average growth of 15- 20 percent or more last year.

The rise in yellow metal price has bolstered the demand for gold loans. Normally, such interest is short-lived, but this time because of Coronavirus, the impact in incremental demand continued.

The weakening of yellow metal prices towards the fag end of 2020 and the first quarter of 2021 hit the gold loan business. Attempts to cash in on strengthening demand following a recovery in prices, post-April, were hindered by lockdowns in many states.