A primer on the new wave of lending against gold

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Editor's note: “Indians love gold” is a line that is repeated ad nauseam in financial circles. The reasons for this are well documented, from tradition to perceived investment value to security. Over the decades, Indian households have built up gold worth $1-$1.5 trillion, or over Rs 100 lakh crore, worth of gold holdings, largely in the form of jewellery. More recently, gold has in different ways become a hot topic. We wrote just last month about the new buzz in fintech circles around digital gold. At the same time, in the wake of the COVID-19 pandemic, another gold product has surged—the good old gold loan. Demand for gold loans saw a spike last year due to liquidity crunch in the system as banks and other lenders tightened lending standards across the board—especially in unsecured lending to retail. Indians increasingly turned to gold to raise the much-needed cash for survival, especially as the pandemic and associated lockdowns triggered waves of pay cuts and layoffs across industries. Gold loans extended by banks increased 132% last year, according to the latest credit report by the …