Express press service

NEW DELHI: With businesses closing, job losses and wages cut, many people pledge their household gold savings to borrow money to cover basic expenses as well as medical needs. emergency, according to official data from the Reserve Bank of India.

According to the latest data from the RBI, lending against gold has jumped 82% since March 2020. At the same time, durable consumer loans and education loans are down 21.4% and 3%, respectively, showing how much people affected by the economic stress induced by the coronavirus pandemic prioritize their spending.

The stock of loans against gold rose from Rs 33,303 crore in March 2020 to Rs 60,464 crore in March of this year, pushing up the overall personal loan portfolio of financial institutions by 10.02%. One of the main reasons for the surge in gold lending is the increase in emergency spending due to the second wave of Covid, the loss of income and the reluctance of banks to provide unsecured personal loans, forcing people to remove gold ornaments and rush to the banks to raise funds.

According to bankers, the trend is expected to continue. “The surge in gold lending is likely to increase further. While the demand for gold loans was already high even last year, we saw new demand starting in April. One in three loan requests is for gold lending. In fact, low income and lack of collateral forced many people to opt for it, ”said a senior official at the State Bank of India.

Obtaining personal loans has also become difficult, with banks becoming more cautious of unsecured loans. So people who have lost their jobs and still have monthly payments to pay use gold jewelry as a last resort to take out another loan. “The rejection rate is high for the personal loan criteria. We were told to go for additional KYCs, including payslips, and ask for collateral, including stocks and other assets. Management is very cautious given the fear of a high NPA, ”said an ICICI Bank executive.

The central bank had already warned that the direct impact of the Covid would be on public spending. RBI data shows loans for consumer durables plunged to 21.4%, with outstanding loans falling to Rs 7,307 crore in March 2021 from Rs 9,299 crore in March 2020. Outstanding education loans also fell from 65,744 crore to Rs 63,805 crore.