Buy Gold

Learn how to buy and sell gold in our online guide to gold investing
Subscribe to RSS feed
Gold News | Gold Investing | Scrap Gold | Buy Gold Bars and Coins | Buy & Sell Bulk Bullion | Sell Your Gold | Gold Forums
Sunday, December 16th, 2018 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

India: Gold As Collateral Secures Lower Interest Rates

Farmers in India are lining up to apply for bank loans with gold as security and securing an interest rate of as low as 4 percent compared to the 30 percent rates offered by local money lenders.

Although the idea of using gold as collateral is not a new one, the low rate of interest offered by banks is. “Most farmers have woken up to the fact that they can get a loan, using gold as security, for a low interest rate of just 4%. Farmers currently pay 7% on crop loan. There is an interest subvention clause that most farmers are drawing on these days, ostensibly under the category of farm loan,” said ¬†Chaitanya Shellar of Sonamull Traders, a bullion investment firm.

An Indian banking official said that many public as well as private sector banks are intending to double their portfolio of gold-backed loans by extending these loans to small- and marginal farmers.

Other actors active in the gold loan business have already been encouraging poor Indian families to leverage their gold holdings, rather than letting their valuables sit idle. According to analysts, this business is lucrative because of the sizeable spread that a company can make, coupled with the low rate of non-performing loans.

“Even affluent farmers have a means of accessing short-term cash on personal valuables. Many farmers with significant amounts of gold have a new way to access emergency cash,” a banker told media.

Venugopal Shastri, bullion analyst with a foreign brokerage house, added that such schemes are virtually risk-free even for the banks since they will ensure a significant margin between the value of the loan and the value of the gold.

Since loans will allow people to start their own business or to expand an existing business, they will also result in an expansion of the economy and in job creation, said bullion analyst Ashwin Thanedar.

Thursday saw gold rising for the second consecutive day, almost hitting a one-month high, with spot gold rising to $1,542.89 an ounce.

Looking for a precious metals provider that sells gold coins and bullion (including junk silver)? Click here to visit our favorite provider (FREE SHIPPING!).

© Copyright 2018, Buy Gold