THE FUNDAMENTAL OF LOAN

The loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial
assets over time, between the lender and borrower.

In a loan, the borrower initially receives or borrows an amount of money, called the principal, from
the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later
time. Typically, the money is paid back in regular instalments, or partial repayment; in an annuity,
each instalment is the some amount.

Type of loans

Secured

A secured loan is a loan in which the borrower pledges some (eg. A car or property) as collateral.

A Mortgage loan is a very common type of debt instrument, used by many individuals to purchase
housing. In this arrangement, the money is used to purchase the property. The financial institution,
however, is given security- a lien on the title to the house- until the mortgage is paid off in full. If the
borrower default on the loan, the bank would have the legal right to repossess the house and sell it,
to recover sums owing to it.

Unsecured loan

Unsecured loan are monetary loans that are not secured against the borrower’s assets. These may
be available from financial institutions under many different guises or marketing packages.

Why Indians take to gold

1) Gold is considered an equivalent for liquid cash: gold is highly liquid and portage as a
Security or asset. It can be converted to cash anytime when an emergency arises and is
considered a friend in need.
2) Gold is considered as status symbol: especially in india gold symbolizes wealth. In Indian
weddings the gold the bride brings in show her family’s status and wealth and form part
of the dowry given to bride. It is believed that a bride wearing 24k gold on their wedding
to bring luck and happiness throughout the married life.
3) 3) Gold is a very good investment: Gold is an asset which has consistently increased in
value and thereby considered as a safe and secure investment. Gold is considered an
effective diversifier which helps to reduce portfolio risk.
4) Gold is considered as a good gift item: its precious and worthy across all cultures and
times. The gold jewellery is given as gifts during weddings. festivals and other special
occasions.
5) Gold has great religious significance: Gold is the symbol of the Hindu Lakshmi and
considered highly auspicious. Gold is brought or presented on festivals like Dhanteras
anndakshaya tritiya. Toe rings are never made of gold as it represents the goddess of
wealth and should not be soiled by touching a human’s feet.
6) Great ornamental value: who can resist gold Ornaments? Women of every age and time
7) have always loved wearing gold ornaments. Moreove, gold ornaments are never out of
fashion. It also may be remembered that wedding rings are also traditionally made of
gold to mark a long lasting relationship.
8) Great value as heirloom: Gold jewellery is something which can be passed down from
one generation to the other as ancestral property.
Isn’t this why people say Gold is forever?

INDIAN MARKET AT A GLANCE

A LOOK AT THIS NBFC SECTOR

The Indian NBFC sector can broadly be segregated into:-

1) Infrastructure NBFC segment,

2) The Housing Finance NBFC segment and
3) The Retail or Consumer Finance NBFC segment.

4) The Indian Non Banking Finance Companies (NBFCs )accounts for a critical part of the
Country’s overall financial system. It is estimate that the NBFCs as a whole account for
9.1% or Rs.4 trillion of assets of the entire financial system in india

RATIONALE BEHIND GOLD LOAN

5) As the name suggest its loan against Gold. It’s the most convenient way to receive cash
in no time from any NBFC / Bank by pledging your gold Coins/ bars/ Exchange traded
funds ETFs/SBI gold certificates etc., this is one product which minimal documentation &
no processing time
Product is designed in a way it ensures hassle free process for the customer & loan
availed can be put to any use.
Loan amount eligibility is evaluated basis on the Gold value banks usually fund 70-80% of
the gold market value & on repayment of the loan gold deposits are returned back to
the loan gold deposits are returned back to the customer. This loan as it’s a secured
product & rate of interest ranges between 11.5-24% per annum.
Rate of interest is decided on two factors risk criteria:-
1) What % of market value of Gold you are availing loan. (if its 90% of the Gold market
value then interest charged will be higher & vice a versa for lower loan amount as
compared to gold value) &
2) Customer relationship with the bank.

THE REAL VALUE OF GOLD

The Indian gold market is market that has grown at an impressive pace and is still
currently brimming with opportunities. While since FY02 till FY10 the gold stock in
india is estimated to have grown at a CAGR (Compounded Annual Growth Rate) of
35-40% ( estimated that in FY11 alone the country imported 900-1000 tonnes of
gold) there is every reason to believes that these rates can be sustained or even
bettered going forward. The World Gold Council believes that gold demand in the
 country will continue to grow at 30% in real terms driven by urbanization, rapid GDP
growth, burgeoning middle class incomes and a sustained and potentially rising
savings rate of 35-40%

Gold loan sector:- organized and unorganized

Gold price in India – 40 years History
Gold has always fascinated us Indians but do you know how prices of Gold have
varied in india. I happen to visit RBI website which publishes lots of reports including
weekly Gold prices.
So here it is 40 Years price history of gold

OPPORTUNITY FOR ORGANIZED SECTOR

1) India is estimated to possess 10% of the total gold stock in world 18000-20000 tonnes.
2) The opportunity for gold loan players lies in the fact that only 10% of this gold stock has
been pledged as gold and only 1-2% is captured by the organized segment. Greater
professionalism, standardization and the ensuing goodwill and trust can help channel the
gold stock to the broader gold loan segment with particular reference to the organized
segment.
3) While the potential size and the scope of the gold loan market are very admirable, that
alone is not enough. There has to be an undercurrent of strong demand to lend credence to
the scope and even on this count there is much to be optimistic. In fact there has been a
radical shift in the perception of gold loans by the average Indian. Earlier while pledging gold
for loans was frowned upon and was largely looked upon as a last resort, these days gold
loans are being taken even for the most elementary reason (or as bridge loans), such that
they have come to be known in common parlance as “ the loan of convenience”
 4) Greater word-of-mouth, perception changes and the increasing share of the organized
segment in the total gold loan market can help bring the idle old gold stock to the gold loan
market.
5) Strong consumerism levels have only contributed to the boom of gold loans. In addition to
that while initially the gold loan were only taken by the rural class, these days a broader
class of people encompassing office goers in metros and semi urban places, the elderly and
the youth have all embraced this product.

GOLD MARKET AND THE BOOM OF GOLD LOAN SEGEMENT

India is one of the largest market for gold, accounting for opproximately 10% of the total world gold
stock as of 2010. Rural India accounts for 65% of this gold stock. Though gold prices have increased
at more than 19% CAGR from 2002 to 2010, gold stock in India has grown at 22% CARG during the
same period to 18,000 tons (Rs. 32,000 billion) as depicted in in figure 1. The demand for gold has
followed a regional trend with southern India accounting for 40% of annual demand for gold has
followed by the west (25%), north (20-25%) and east (10-15%).

The organized gold loan market has grown at 40% CARG from 2002 to 2010. NBFCs have been a
major driving force behind this growth given their extensive network, faster turnaround time, higher
loan-to-value rations and the ability to serve non-bankable customers. Of late, banks have improved
their gold loan product features and services. Coupled with comparatively lower interest rates and
charges, banks stand to gain market share at the expense of NBFCs in near feature. Diagram

Figure 4 : depicts the gold loan portfolio size for key organized sector players,
again highlighting the rapidly growing dominance of NBFCs (e.g., MUTHOOT FINANCE,
MANAPPURAM and MUTHOOT FINCORP)

COMPANY PROFILE

IIFL (India Infoline Ltd)

IIFL Is the institutional equities division of India Infoline Ltd. (Bloomberg: IIFL IN), A listed multi-
services financial company with a market capitalization of US$400 million. With a team of 25
research analysis, full-fledged sales and trading team, and an experienced investment banking team,
IIFL is rapidly emerging as one of the premier institutional equities houses in India. Headquartered in
Mumbai, IIFL has overseas in Singapore and Dubai.

Amongst its other businesses, India Infoline is one of the leading players in the retail broking and
insurance distribution, and is currently in the process of scaling up its non-banking financial services
and wealth management franchises. The group has over 600 branches located all over India.

India Infoline Group

We are a one stop financial services shop, most respected for quality of its advice, personalized
service and cutting-edge technology.

Vision statement

Our vision is to be most respected company in the financial services space.

India Infoline Group Subsidiaries

 India Infoline Media and Research Services Limited

 India Infoline Commodities Limited
 India Infoline Marketing & Services
 India Infoline Investing Services Limited
 IIFL (Asia) Pie Limited

IIFL GOLD LOAN

Gold loan or loan against gold is the easiest and quickest way for servicing your financial needs. To
avail a gold loan, all you need to do is pledge your gold ornaments with us and they would provide
you with a loan amount as per the market value of your gold. Unlike other loans, gold loan does not
require you to provide any income or salary proof. Moreover, it has comparatively lower interest
rates, requires lesser documentation, and hence is processed in lesser time.

They at IIFL provide maximum loan against your gold at lowest interest rates. We have a strong
presence Pan-India and have serviced a large number of customers in a very short span. We offer
different types of schemes as per your requirement and convenience. Following are the main
features of our loans:-

 Loan amount ranges from min RS 5,000 to max RS. 10,00,000

 Tenor for loans ranges from 3 months to 12 months
 Loan can be paid back on a monthly or quarterly basis
 Interest / Loan Amount due can be paid at any of our Gold Loan branches pan-India
 Minimal amount of paperwork and documentation is required
 Loan gets processed in as low as 5 minutes
 Variety of schemes are available to chose from

Your gold is insured and secured safety with us in fire and burglary proof valuts

LOAN DISBURSEMENTS PROCEDURE

Customers

Customers are typically small businessmen, vendors, traders, framers and salaried individuals, who
for resons of convenience, accessibility or necessity, avail of our credit facilities by pledging their
gold jewellery with them rather than by taking loans from banks and other financial institutions.

Players in gold loan industry

  The key players in the Indian gold loan market include the unorganized sector,
banks- public/ private/corperatives and NBFCs.
 While the unorganized sector, comprising local pawnbrokers and moneylenders, has
traditionally dominated the gold loan market for many decades and still commands
nearly 75% of the market, the organized sector, led by NBFCs is catching up fast.
 The organized sector has grown at a rapid pace of 40% CAGR from 2002 to 2010 and
is expected to grow by 33% to 41% CARG in 2011. And in doing so, these companies
are challenging the dominance of the large unorganized sector.

List of nominated banks

1. Allhabad Bank
2. Bank of India
3. Canara Bank
4. Corporation Bank
5. HDFC Bank
6. ICICI Bank Ltd
7. Indian Overseas Bank
8. Indusland Bank ltd
9. Oriental bank
10. Punjab National Bank
11. State Bank of India
12. Union Bank of India

List of Major NBFCs

 Muthoot Finance
 Mannapuram Gold Loan
 Muthoot Fincrop
 Reliance capital
 Karvy Gold Loan

Unorganized Sector

 Money lenders
 Marwadis (Jewelers)
 Pawnbrokers

Objectives of the study

DATA ANAYSIS & FINDINGS