India has experienced a substantial increase in gold-backed loans over the past year, driven by sluggish economic growth and rising gold prices. Data from the Reserve Bank of India indicates that these loans grew by 68% in the first nine months of the fiscal year, a significant jump from the 12.7% growth observed during the same period last year. The ease of obtaining loans against gold and the higher loan amounts available due to increased gold valuations have contributed to this surge.
However, this rapid growth has been accompanied by a rise in defaults, prompting the RBI to call for improved valuation and monitoring procedures. The increasing indebtedness of the Indian middle class, with a substantial portion of their income directed towards loan repayments, is a growing concern. Financial institutions are now urged to exercise caution and implement stricter measures to ensure the sustainability of gold-backed lending practices.
