In fact, in November last year, the Reserve Bank had expressed concern over the rapid growth of unsecured retail .
Due to which banks were ordered to be more vigilant. Apart from this, the risk weightage of personal advance was also increased from 100% to 125%. However, some outstanding gold advance are very less compared to personal advance.
According to RBI, the total outstanding gold advance as of September 30 were Rs 1.5 lakh crore. This is only 10.5% of the outstanding personal advance of Rs 14.3 lakh crore.
Jinay Gala, Director, India Ratings and Research, said that when the sources of borrowing are limited, the option of taking a in lieu of gold or jewelry kept at home increases.
The inclination of people towards taking gold advance has increased due to the increasing strictness of RBI on unsecured .
Apart from that, the demand for gold has also increased due to the rise in gold prices. The demand for gold has increased due to several factors.
Due to global uncertainty, gold has emerged as a more attractive asset as an investment and collateral.
When access to unsecured is limited, gold are a more reliable and collateral-based option. Apart from its faster loan process, it requires fewer documents.
On the other hand, according to experts, the youth are also choosing to pledge gold for their consumption and travel-related needs.
Meanwhile, big banks are also increasing their gold advance portfolio. That is, SBI’s personal advance gold increased by 28.3% to Rs 38,826 crore as on September 30.
Gold price increased by 16% in 6 months, 41% in 1 year
According to the World Gold Council, the price of gold was Rs 62,918 per 10 grams on May 13 this year. It has increased by 16% to Rs 73,006 as of November 8.
The price of gold has increased by 41% in the last one year. According to Goldman Sachs, the price of gold can increase to Rs 81,396 per 10 grams by the end of 2025.