In India, about 200 tonnes of gold have been used as collateral to raise loans by end November in this fiscal (2011-12).According to industry estimates nearly Rs. 55,000 crore worth of the gold has been pledged to raise loans to real estate, buy goods, fund short-term farm credit etc..
Mr. Siddhartha Sanyal, chief India economist, Barclays Capital said, ''In India, the organised gold loan market is just developing and can potentially be a source of liquidity, particularly for the middle and upper middle class category.
A recent report published by Citibank estimates that the organized gold loan market was worth Rs. 50,000- 53,000 crore during 2010-11 and had been growing at a compounded annual growth rate of 35% over the previous five years.
The gold loans work out very attractive for the borrowers as well, as the rates charged are much lower than that that on (unsecured) personal loans.
The average rate of interest on glod loan is 12-20% and time taken to process an application is at most 2 to 3 hours, whereas the rates on personal loans go up to 18 to 30% and processing takes much longer.
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