Covid-19 pandemic outbreak is witnessing a surge in gold loan borrowings in the past few months as people find it as a better option to mitigate financial exigencies in Commercial and cooperative banks and gold loan companies.

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Sources in the banking sector said compared to pre-Covid times, the number of people approaching banks to pledge gold has more than doubled now for purposes such as payment of children’s school and college fee, business, completion of house construction and even to pay  outstanding loans etc. The demand for gold loan saw a sharp uptick after the RBI in August this year increased the cap on LTV (loan to value) ratio in gold loans from 75% to 90%, till March 31, 2021, in order ease the flow of cash to households, entrepreneurs and small businesses. 

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The trend is also attributed to banks rejecting more and more applications for business and other loans owing to poor credit rating triggered by decline or loss of regular income during the Covid induced lockdown. Sources said banks readily offer the more secured gold loan solution to customers whose credit rate is not so good. 

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