Gold Loan Companies Step Up Gas For International MSME Day

According to industry estimates, Indian households have more than 25000 tonnes of gold. And, less than a fifth of that is being pledged to raise loans. About 60 per cent of this market remains outside the formal financial system, indicating vast potential in the gold loan sector.

Kolkata (West Bengal):Gold loan companies like Muthoot Finance, Capri Global and others have stepped up gas ahead of the International MSME Day which falls on June 27. A large section of the MSME depends on gold loans to meet their working capital needs as it is easier and quicker to get and they can get loans of any ticket size. Generally, the ticket size of loans varies between Rs 80,000–Rs one lakh.

George Alexander Muthoot, Managing Director, Muthootsaid, "Muthoot Finance is opting for innovative technologies to revolutionise credit access to MSMEs. Although our MSME customers may require to physically pledge their gold for evaluation, Muthoot Finance's extensive 5000 plus branch network, and a robust phygital infrastructure through Loan@Home initiative facilitate faster approval of loans and disbursements."

“We also encourage more digital transactions while disbursing gold loans, especially loans of Rs. 20,000 and above. We disburse loans via IMPS or UPI, apart from RTGS/NEFT networks which ensures that their credit history is also strengthened. Our mobile app and website provide customers with easy access to loan details and repayment options to enhance transparency and include MSMEs into the modern digital economy," he added.

According to industry estimates, Indian households have over 25000 tonnes of gold. And, less than a fifth of that is being pledged to raise loans. About 60 per cent of this market still remains outside the formal financial system, indicating vast potential in the gold loan sector.

"Muthoot Finance recognises the potential of pledging this idle gold in driving entrepreneurial spirit by navigating through unforeseen emergencies and working capital needs of small business. Gold loan, our principal business, is often opted by MSMEs and small business owners for a constant cash flow to manage critical situations such as machinery breakdowns, supply chain disruptions as well as to expand business operations or invest in newer technologies," added Muthoot.

"In such situations, most MSME owners face rejection from traditional lenders often leading to closure of operations. In alignment with the increased focus from RBI on accelerating growth and reducing stress in the MSME segment, gold loan NBFCs play a crucial role in providing them with a working capital cushion with quick access to funds and flexible amounts all without the need for a strong credit history. This is exactly what they need to seize new opportunities, and maintain business continuity," said Muthoot.

In honour of International MSME Day on June 27, Capri Loans has announced the launch of an affordable gold loan scheme designed specifically for Udyam Aadhaar holders.

"With an industry-leading interest rate of just 99 paise per month per Rs. 100 (11.88 per cent per annum) and no hidden charges, this initiative offers additional benefits like approval within 30 minutes and flexible repayment options. This initiative will create credit access to MSMEs, especially in tier 2 and tier 3 cities,” said Ravish Gupta – Gold Loan, Business Head at Capri Loans.

Gold loan NBFCs specialise in providing loans against gold as collateral. The loans secured by the yellow metal eliminate the need for extensive credit checks and collateral requirements to finance a broader range of businesses.

Given their presence in pan-India with state-of-the-art technology, these NBFCs can offer loans in a short time. The quick turnaround time is crucial for MSMEs facing urgent financial requirements, such as restocking inventory, managing operational expenses, or seizing growth opportunities. If we look at the other side, conventional banks might take days or weeks to process loan applications.

For micro-enterprises, obtaining flexible loan sizes involving a lower ticket size, which is not feasible for traditional banks to offer given their cost structures, is a crucial factor.

No charges are levied to the customer by gold loan NBFCs, except for the processing fees and offers the most competitive interest rates in the industry. The repayment structure is matched with cash flows, giving much-needed flexibility and ensuring a smooth flow of working capital, unlike traditional monthly repayment models.

Also, gold loan NBFCs give the flexibility of partially withdrawing the gold depending upon the repayment made to the lender.