From rainy day reserve to strategic financial asset: The changing face of gold

Indian households are increasingly viewing gold not merely as jewellery but as an enabler of aspiration.

For generations, when Indian households faced times of crisis, they have habitually relied on gold to save the day. Whether it's an unplanned medical crisis, a sudden job loss, or a personal crisis, gold has been one asset that provides instant liquidity. The same stands true even today, where for millions of Indians, gold still remains their first emergency fund; trustworthy, physical, and always accessible.

However, in recent years, the function of gold has undergone a subtle change. It's no longer just our grandmother’s rainy-day reserve; it is increasingly seen as a strategic financial asset. A golden key that can open security as well as opportunity. This transformation is the result of both gold's inherited strength as well as a fast-evolving economic and regulatory environment.

The timeless superpower of gold

Instant Liquidity

Gold's biggest strength lies in its speed and simplicity. Traditionally and even now, gold loans are one of the fastest sources of credit. They require minimal documentation, no time-consuming credit process, and approvals are in minutes, not in hours and days. Fewer financial instruments come closer to the kind of instant liquidity that gold loans offer.

Low Cost of Credit

Since gold loans are completely secured, they typically start at lower interest rates compared to unsecured credit products like personal loans or credit cards. For families that have to deal with tight cash flows, this affordability can be a game-changer. The anytime prepayment feature enabling the consumer to close the loan before the tenure helps reduce the interest outflow for the customer

Cultural Trust

Indians are emotionally and psychologically attached to their gold. Very often, the family is involved in taking a decision towards availing a gold loan. That underlines the robust repayment discipline that gold loan enjoys, as no one ever wants to lose their gold. There's a commitment to redeem the gold soon.

Also read | Sovereign Gold Bonds: Should you redeem early or hold till maturity?

External Forces Strengthening Gold's Position

Global Volatility: A Proven Store of Value

In a time of geopolitical uncertainties, chronic inflation, and market volatility, gold remains a source of stability. Unlike equities or currencies that move with sentiment, gold stands firm. Households and investors alike turn to it to maintain real worth and hedge against risk. In October, Gold prices soared, surpassing $4,000 per ounce. Reason being inflation fears, economic instability, and global tensions. With central banks increasing their gold holdings, demand has surged.

Phygital transformation 

Phygital transformation is, trust meets technology, is reimagining customer experience in gold finance. It amalgamates the reassurance of a physical branch with the speed and convenience of digital. Customers can now begin their gold-loan journey online and finish the process either at a nearby branch or through doorstep service.

Changing Consumer Behaviour

Indian households are increasingly viewing gold not merely as jewellery but as an enabler of aspiration. Gold loan, once served as short-term avenue has now moved to funding higher education for kids, to even expanding small businesses, to unlocking opportunities, to progress. Gold loan is an asset that now empowers families towards growth and dreams into action. The gold story is changing; from "sell or pawn in distress" to "borrow strategically for strength."

Regulatory Maturity

Add to all of the about, the good governance, competitive pricing, and protection for customers have increased consumer confidence and grown formal involvement in this segment.

And finally, Gold’s transformation from an emergency fall back to a deliberate, strategic instrument mimics the evolution of Indian families themselves. As families push through an ever more complicated financial landscape, gold still spans generations and stands firm as India's most reliable partner in the creation of financial security and confidence.

The writer is CEO, Muthoot FinCorp.

Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.