TN Gold Loan Demand Rises Sharply As Isolation Lowers Income Levels

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Housewife Rajalakshmi recently pledged five sovereigns in gold – something she had acquired over the past four years – at a state-owned bank in Chennai to cover her expenses. Until COVID-19 broke out, the 48-year-old worked as a domestic worker in two homes (earning £ 4,000 a month per home). Her husband worked as a cook in a small restaurant and earned £ 7,000 a month.

“I lost my job last year, as many houses stopped accepting maids. My husband’s restaurant closed in January; he just found another job. I have to pay for my daughter’s studies and my son’s college tuition. I had some savings that were not enough, so I thought I would pawn my gold jewelry for now, ”she said.

The bank’s branch manager said that before the pandemic broke out, 5-7 people went to the bank a month to pawn gold; but now clients are intervening almost every day to take advantage of these loans.

Female clients

“More and more women are coming to pledge gold to help their husbands’ business and pay for school / college tuition and even the hospital bills of their loved ones. This number is growing day by day, ”he said.

According to R.G. Saktisaravanan, Additional Registrar and Managing Director of Tamil Nadu State Apex Co-Operative Bank Limited, in Tamil Nadu, cooperative banks issued 30,000 crore gold loans during the 2020-2021 fiscal year. As of March 31 of this year, the bank’s gold loan portfolio was Rs 1,000, and the 23 district central cooperative banks’ portfolio was Rs 6,000.

According to Mr. Saktisaravanan, typically the demand for jewelry loans will be higher during the April to June quarter to pay for school and college tuition.

“Most of our subsidiaries have limited hours due to blockages, and we are slowly resuming our normal operations. We expect our loan to grow in the coming days, ”said George M. Jacob, CEO of Muthoot Finance.

Loan cancellation is likely

The official said cooperative banks are slowing down their gold lending due to the rejection of the gold loan expected from the state government.

Minister for Cooperation I. Periyasami recently announced that the government will soon issue an order to refuse loans against gold for up to 5 sovereigns, which is one of the pre-election promises of DMK.

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