Why Kerala and Tamil Nadu are big markets for Gold loans?

Kerala and Tamil Naduare big markets for Gold loans

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India’s love for gold is both historic and legendary. Even in the current scenario, the gems and jewellery sector is one of the important sectors of the Indian economy. As of 2017, the domestic gold, gems and jewellery market size was pegged at about USD 75 billion and the domestic demand for gold in 2018 was estimated to be 760.4 tonnes. It is important to note here that the demand for gold is not the same in all Indian states. The consumption and demand in some of the southern states such as Kerala and Tamil Nadu far exceed that of any other. This one factor makes these states a considerably large market for gold loan in India.

Gold consumption in Kerala and Tamil Nadu

Gold has traditionally been a benchmark of wealth in the country. The culture in Tamil Nadu and Kerala make gold a standard of affluence and social standing. Women traditionally inherit gold rather than property or money from their parents. Moreover, festivals such as Diwali and occasions such as birthdays and weddings are marked by gold gifts. Gold demand in the southern states is almost 40 percent of that in the entire country. The western states consume about 25 to 30 percent, northern states about 20 to 25 percent and eastern states about 10 to 15 percent of all the gold demand in the country. The very high number of gold showrooms in the states of Kerala and Tamil Nadu shows that these are the states that buy and use most of the gold in the country. This also makes gold the easiest collateral available for pledging when in need of a loan. This is perhaps the reason why some of the best gold loan companies in India are located in these two states.

The Gold Loan Market

Gold loan or loan against gold is a secured loan extended to a customer by a bank, gold loan company, or financial institution in which the customer pledges gold coins, bars, and ornaments as collateral. The loan amount received by the customer is bench marked against the market value of gold.According to a KPMG report published last year, the organised gold loan industry of the country could reach INR 3,101 billion by 2019-20.

 On the other hand taking a loan is a difficult, complicated and long process. And also Loan lends 75% at LTV whereas You can avail Cash for Gold which is an instant process & would be 99% around the actual value.”

The Sparkle of the Bullion

The sheer extent of the gold loan market in Kerala and Tamil Nadu can be understood in terms of the gold holdings of the loan providers. According to a news report from 2016, Kerala’s top gold loan companies possessed more gold holdings than the bullion reserves of some of the more advanced and developed countries such as Australia, Singapore, Belgium, and Sweden.This in itself highlights the huge amount of gold available in the hands of individuals and households in the two southern states – Kerala and Tamil Nadu.

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