Case study & reports of gold loan.pdf - THE GROWTH OF GOLD...

THE GROWTH OF GOLD LOAN MARKET IN INDIA: A CASE STUDY OF KERALA
Sumeetha Mokkil Maruthur
1
Abstract
Gold has occupied a special place in the socio economic milieu of India. It is considered to be an
important asset, a hedge against inflation and an immediate source of cash especially for the rural
households in India. Gold is used as collateral to earn money for short term needs. Due to an emotional
attachment to the gold that households have, most of households do not sell gold ornaments; instead they
pawn it for immediate use. In India, gold is associated with many socio religious customs and therefore
households attach an emotional value to it. Inorder to meet short term financial needs people pledge their
gold ornaments as collateral. This has shown a rising trend post pandemic in India, as most of the people
have either lost their jobs or shut down their small business enterprises. As per The RBI study in 2017 on
Indian Household Debt, it is seen that about 18% of debt in Kerala is in the form of gold loans, which is
highest for any Indian state. Kerala has just 3% of the country’s total population, but handles about 20%
of the total gold sales. Gold retail houses have mushroomed within the state and have pursued an active
expansion path outside the country, catering primarily to emigrants from India. Kerala has the highest per
capita consumption of gold and has the highest inflow of remittances among Indian states. The
consumption expenditure in the state has witnessed a rapid growth in the state post 1995. Two of the
largest NBFCS, Muthoot and Manappuram, which controls about 90% of the gold loan market among
NBFC’S has its origin in Kerala. Though these companies were in existence as early as 1940s, their
growth and expansion began post 1998 after the government liberalized policies with respect to the Indian
gold loan market. Given this context the paper is trying to explore questions on the macro economic
implications of a growing gold loan market in India, correlation with flow of remittances and gold loan
market growth in Kerala, pattern of growth post pandemic and new strategies pursued by NBFCS and
banks to ensure a robust growth of the gold loan market. The organized sector public banks data would be
used to gather information about gold loans disbursed. The annual company reports of NBFCS would
also be analysed to understand the volume of trade and the innovative instruments adopted by the
NBFCS. RBI reports, World Gold Council Reports, Cognizant Report, KPMG Report would be used for
secondary data analysis. Kerala migration Survey, conducted by the Centre for Development Studies,
would provide data on remittances to specific districts and also data on gold possession.
Keywords: gold loan, NBFC, remittances, Kerala
1
Honorary Research Fellow, Migration Studies, Centre for Public Policy Research, Koch, Kerala
[email protected] , [email protected]