Radha maushi, the house-help earns a living by mopping, sweeping, cleaning in many homes. She earns around Rs.15-20k per month. After providing for her household expenses, she used to keep the balance in a potli, tucked away safely in the atta dabba.
Every time, the saving touched 10k, she used to go and buy some gold – be it a earring or nose-pin or a bangle but always gold. She had been coaxed umpteen times to park the savings in a bank or the Post Office. Well, like most, she never ever did that and continued to buy small trinkets of gold. Those of us, the “non-believers of gold” could never fathom this behaviour.
But it is only now that we understand Radha maushi’s perseverance to buy gold; we fully understand why gold has got so much significance in our Indian households.
Always prepared for shortages, famines, floods and maybe our ancestors for pandemics, gold is the true fall back for millions of Indians. With unemployment raging, loss of income pushing many into poverty and risks going up, gold loan is once again becoming the most preferred avenue.
Such adverse times are unfortunately the “peak season” for the likes of Muthoot and Manappuram, who have made life easier for those in financial distress and seeking a quick loan on the gold owned. In such times, personal loans, be it secured or unsecured, do not come by, which is why gold loans are like the manna from the heavens. And its easy to get the money – walk into a branch, get the gold, mostly in jewellery form, assessed and valued and walk out with a loan of upto 75% of the value, of course, based on the existing gold price.
Gold loan has become Over-the-counter, helping ease the immediate financial needs. The customer can choose to pay only the interest and opt to repay the principal amount at the time of closing the loan. Maybe due to the lockdown currently, the walk-ins for gold loans will be low but once it is lifted, it will be a deluge – this is exactly what we had seen last year and we could more of the same this year too.
At the moment there are many banks and NBFCs offering gold loans. According to data compiled by Bankbazaar, banks are offering gold loans with interest rates starting as low as 7%. In comparison, personal loans are offered at around at least 10%. For a Rs.5 lakh, 3-year tenure gold loan, Punjab and Sind Bank is offering the lowest interest rate at 7%, Bank of India at 7.35%. Take a look at the table given below to get a gist on the rates.
Though there are so many banks and NBFCs still giving loans, the majority of people, mostly poor and uneducated, prefer going to the money lender where then the vicious cycle of debt and poverty stalks them for the rest of their lives.
Yes, the pandemic has and is teaching us a lot of life lessons. And maybe for the urban and educated people like us, gold might never have that lure but for majority of India, it is a savior. No wonder Indians are the biggest buyers of gold in the world!