{"id":185,"date":"2019-08-22T16:51:22","date_gmt":"2019-08-22T16:51:22","guid":{"rendered":"https:\/\/goldsilverdesk.com\/news\/?p=185"},"modified":"2024-07-08T17:57:19","modified_gmt":"2024-07-08T17:57:19","slug":"indians-pawning-the-family-gold-amid-credit-crunch","status":"publish","type":"post","link":"https:\/\/goldsilverdesk.com\/news\/indians-pawning-the-family-gold-amid-credit-crunch\/","title":{"rendered":"Indians pawning the family gold amid credit crunch"},"content":{"rendered":"\n<p>August 21, 2019<\/p>\n\n\n\n<p class=\"has-small-font-size\"> <em>Reporting by Nupur Anand and Rajendra Jadhav <\/em><\/p>\n\n\n\n<p> AURANGABAD\/MUMBAI, India (Reuters) &#8211; Refused a loan by a state-run lender and desperate for funds to buy cotton seeds before the summer sowing season window closed, Indian farmer Babasaheb Mandlik ran out of choices &#8211; he pawned his wife\u2019s gold jewelry. <\/p>\n\n\n\n<p>Mandlik, who owns an 8-acre cotton farm in western India, pledged 70 grams of gold, almost all of his wife\u2019s precious trinkets, in June in return for 150,000 rupees ($2,105).<\/p>\n\n\n\n<p>\u201cPawning the jewelry was a difficult decision as my wife likes to wear it at festivals and weddings,\u201d 50-year-old Mandlik told Reuters. \u201cI convinced her that we didn\u2019t have any other option.\u201d<\/p>\n\n\n\n<p>Mandlik is not alone. While pawning gold has long been an option for quick funds in a country that is the world\u2019s second-biggest consumer of the yellow metal, several lenders told Reuters of unprecedented demand as people struggle to secure loans from banks grappling with bad debt and a shadow lending industry stung by a liquidity crunch.<\/p>\n\n\n\n<p>The trend, which has prompted some lenders to impose restrictions as risks and borrowing costs rise, has been accelerated by record gold prices.<\/p>\n\n\n\n<p>Indians\u2019 penchant for gold spans centuries and is rooted in the Hindu religion. Households own an estimated collective 25,000 tonnes of gold, which passes from one generation to the next.<\/p>\n\n\n\n<p>Domestic gold prices MAUc1 have risen more than a fifth this calendar year, hitting a record high of 38,666 rupees per 10 grams earlier this month amid a global rise.<\/p>\n\n\n\n<p> <em><strong>(Graphic: Indians pawn jewelry as gold prices rally to record highs amid credit crunch link:) <\/strong><\/em><\/p>\n\n\n\n<p>\u201cAs a lot of NBFCs (non-bank financial companies) have become cautious of giving unsecured or even secured loans, we are seeing more customers opting for gold loans instead,\u201d said Sumit Bali, chief executive officer of IIFL Finance. \u201cOne can obtain a gold loan and walk out of the branch in just thirty minutes.\u201d<\/p>\n\n\n\n<p>IIFL\u2019s gold loan portfolio stood at 65.83 billion rupees ($922 million) at the end of the June quarter, up 46% compared to a year earlier.<\/p>\n\n\n\n<p>Those pawning their precious possessions are most often independent workers, including farmers and small shop owners.<\/p>\n\n\n\n<p>Muthoot Finance (<a href=\"https:\/\/www.reuters.com\/companies\/MUTT.NS\">MUTT.NS<\/a>), a leading gold financing shadow bank, said its gold loans rose 6.6% between April 1 and July 24 this year to 358 billion rupees.<\/p>\n\n\n\n<p>\u201cPledging gold is becoming more lucrative with rising prices. We have seen healthy demand for gold loans in the last few months,\u201d said George Muthoot, director at Muthoot Fincorp, which has 2.98 million customers.<\/p>\n\n\n\n<p>Ashutosh Khajuria, the chief financial officer of Federal Bank Ltd (<a href=\"https:\/\/www.reuters.com\/companies\/FED.NS\">FED.NS<\/a>), a private lender headquartered in south India, said its gold loan portfolio was at an all-time high of around 80 billion rupees and is expected to grow further.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">CREDIT CRUNCH<\/h3>\n\n\n\n<p>Indian shadow banks began to face a liquidity crunch following the collapse late last year of Infrastructure Leasing &amp; Financial Services, a major player in the non-banking financial companies space. That led to a surge in borrowing costs, forcing NBFCs to freeze, or tighten lending practices.<\/p>\n\n\n\n<p>Some gold lenders who are also NBFCs have not been immune, despite their increased popularity with borrowers and the solid commodity backing their loans.<\/p>\n\n\n\n<p>Manappuram Finance (<a href=\"https:\/\/www.reuters.com\/companies\/MNFL.NS\">MNFL.NS<\/a>), which has 2.5 million gold loan accounts, last week revealed its cost of funds in the April-June quarter rose to 9.34% from 8.77% a year earlier.<\/p>\n\n\n\n<p>Muthoot has independently decided to trim the maximum loan amount of 75% of gold value imposed by India\u2019s central bank to 70%, citing higher borrowing costs and the need to shield itself from any future volatility in gold prices.<\/p>\n\n\n\n<p>\u201cWe are still expecting growth of 15% to 20% in gold loans in 2019\/20,\u201d said George Muthoot.<\/p>\n\n\n\n<p>Mandlik, meanwhile, is hoping to be able to buy back his pawned gold, which includes pieces gifted to his wife by her parents, after the cotton harvest in October. But the success of his crop &#8211; and the future of his wife\u2019s jewels &#8211; is at the mercy of India\u2019s monsoon rainfall.Slideshow&nbsp;(2 Images)<\/p>\n\n\n\n<p>\u201cYou can sow the seeds, but yield depends on monsoon rains,\u201d said Mandlik, who lost his 2018 crop to drought.<\/p>\n\n\n\n<p class=\"has-text-align-center has-large-font-size\"><strong>___________________<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>August 21, 2019 Reporting by Nupur Anand and Rajendra Jadhav AURANGABAD\/MUMBAI, India (Reuters) &#8211; Refused a loan by a state-run lender and desperate for funds to buy cotton seeds before the summer sowing season window closed, Indian farmer Babasaheb Mandlik ran out of choices &#8211; he pawned his wife\u2019s gold jewelry. Mandlik, who owns an &hellip; <a href=\"https:\/\/goldsilverdesk.com\/news\/indians-pawning-the-family-gold-amid-credit-crunch\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Indians pawning the family gold amid credit crunch&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-185","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v20.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Indians pawning the family gold amid credit crunch - Gold Silver Desk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/goldsilverdesk.com\/news\/indians-pawning-the-family-gold-amid-credit-crunch\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Indians pawning the family gold amid credit crunch\" \/>\n<meta property=\"og:description\" content=\"August 21, 2019 Reporting by Nupur Anand and Rajendra Jadhav AURANGABAD\/MUMBAI, India (Reuters) &#8211; Refused a loan by a state-run lender and desperate for funds to buy cotton seeds before the summer sowing season window closed, Indian farmer Babasaheb Mandlik ran out of choices &#8211; he pawned his wife\u2019s gold jewelry. 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Refused a loan by a state-run lender and desperate for funds to buy cotton seeds before the summer sowing season window closed, Indian farmer Babasaheb Mandlik ran out of choices &#8211; he pawned his wife\u2019s gold jewelry. 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