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 Locked away deep in the vaults and lockers of India lies a treasure trove worth Rs 30 lakh
crore, enough to wipe out the country¶s fiscal deficit many times over. Gold, India¶s investment
of choice is trading at over Rs 18,000 per 10 grams, opening a window of opportunity for its
owners to channel the value of this idle asset into productive means. Enter gold loan finance.

Indians have traditionally been suspicious of borrowing against gold, but that mindset is
changing as organised players enter the business and customers find a way to unlock the value of
their gold holdings. According to World Gold Council, India has the world¶s largest stock of
around 18,000 tonne of privately held gold, equal to 10% of global stock. According to experts,
when people borrow against gold, it can start a chain of productive economic activity, boosting
demand and consumption.

In India, about 75% of gold loan finance is in the unorganised sector, where the chances of the
financier shutting shop or not returning gold are high. However, the entry of banks like State
Bank of India, Andhra Bank, HDFC Bank, ICICI Bank, Bank of India and several non-banking
finance companies (NBFCs) like Muthoot Finance and Manappuram Finance has infused
confidence among consumers, who now view gold as an asset that can be monetised and not just
a precious commodity.

VC Circle, an independent agency tracking investments, estimates India¶s organised gold finance
at around Rs 270 billion, of which 90% happens in south India. Says  
   Manappuram Finance, a listed gold loan company: ³Demand for gold loans will
continue to be very strong and will grow at a CAGR of over 40-50% in the next 10 years.´

Banks find it safe to lend against gold, while customers get loans faster, with less documentation
and at a lower rate of interest. You can borrow between 60% and 80% of the value of gold.
Proofs of address and identity are mandatory. Banks charge Rs 100-250 for an evaluation. You
must provide a stamp paper to the bank for the mortgage and stamp charges depend on the loan
amount. However, NBFCs do not charge such fees. The customer has to prove ownership of
gold. Some banks may even ask for a no-objection certificate from the lady of the house. You get
the loan in cash or bank transfer from Rs 1,500 to Rs 1 crore.

Source : Financial Express , dated 14.08.2010