Muthoot Finance Ltd., India’s largest cash-for-gold lender by assets, has soared 41% this year, beating all but two on the 103-member S&P BSE Finance Index. All 14 analysts tracking the stock still recommend buying or holding on to it, data compiled by Bloomberg show.
Indian households, among the world’s biggest hoarders of the commodity, have been pawning gold ornaments with lenders like Muthoot to tide over a cash crunch as the pandemic led to job losses and a credit crunch. The long-standing practice has proved a win-win for all involved as gold prices surged to a record.
“This is like a season of gold loans," Ashutosh Khajuria, the chief financial officer at Federal Bank Ltd., which also offers the loans. “Whenever there are uncertainties about business cycles, gold loans grow the fastest, and the current momentum is likely to last at least till the end of this financial year."
With a transaction time of less than an hour and collateral that can be quickly sold off in the event of default, India’s market for such lending is set to expand by at least one-third to 4.6 trillion rupees ($61 billion) in two years to March 2022, according to an estimate by KPMG. Lenders themselves usually face little difficulties in rolling over funds used for lending against gold as more than half of these loans get repaid in less than six months.
Courtesy - Live Mint
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