It is the need of the hour to include gold loans under the priority sector in the Union Budget to be presented by the finance minister.
Gold loans are secured loans offered by most banks and non-banking financial companies ( NBFC ). The lender assesses the current market value of the gold and determines the loan amount. Such a loan helps you get access to cash instantly.
Gold loan non-banking finance companies ( NBFCs ) have sought ‘priority’ sector status for eligible gold loans, including microloans, loans to farmers and micro businesses in the upcoming budget as taking a gold loan against household jewellery is one of the most important funding sources for MSMEs, small businesses, individual and women borrowers.
Drawing parallels between gold loans and microfinance lending, the proposal advocates treating small gold loans ( up to Rs 50,000 ) with an LTV exceeding 75% on par with microfinance lending. This strategic alignment upholds the promise of fostering greater financial inclusion.
The Union Budget can highlight the additional measures for concessional credit in this segment and it can help tap into the hidden potential of the vast gold reserves scattered across rural India.
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