If we look at the data of the last few quarters, there was a significant increase in the number of people taking gold loans. Now the report that has come out shows that after taking the loan, people are not able to repay it. In one line, along with the increase in the number of people taking gold loans, the number of people not repaying them is also increasing. For this reason, gold loan companies are auctioning the pledged gold. The amount collected from the auction of pledged gold in the second quarter (July-September) of the current financial year has increased by three times as compared to the first quarter (April-June).
In the budget in July this year, the custom duty on gold was reduced to 6%. Due to this, the price of gold fell and the value of the pledged gold became less due to the loan and interest. Due to this, gold loan companies had to face difficulties. However, there has been an increase in the price of gold after July. Now companies do not want the loan amount to exceed the value of the pledged gold.
Due to the strictness of the Reserve Bank, companies are selling the mortgaged gold of those customers who are not able to repay the loan on time. Companies like Muthoot Finance and Manappuram Finance have auctioned large quantities of gold. Muthoot Finance has auctioned gold worth Rs 250 crore only between July-September. Whereas in April-June this figure appears to be Rs 69 crore. Same is the condition of Manappuram Finance also. This company has also auctioned gold worth Rs 360 crore between July-September.
When a person takes a gold loan, he is given a time limit to repay the loan. In case of non-payment on time and non-contact with the company, companies auction the pledged gold. However, notice is given to the customer before the auction.
The three-fold increase in auction proceeds in the second quarter shows that companies are now becoming stricter towards customers who do not pay on time. According to the guidelines of the Reserve Bank, companies are making the gold auction process transparent and as per the rules.
