MUMBAI: In the first seven months of the current financial year, loans by banks on gold jewelery have increased by 50.4 per cent. The sharp increase came even as credit in every other personal loan segment grew in single digits.
Data on sectoral deployment of Bank credit Released by the RBI on Friday Gold Loans 1,54,282 crore outstanding as on 18 October 2024. At the end of March 2024, total gold loans stood at Rs 1,02,562 crore. The year-on-year growth was 56 percent compared to 13 percent in October 2023.
The rise in gold loans in the first seven months can be attributed to several factors, including a shift from NBFCs and secured over unsecured loans, bankers said. Prioritizing loans. Bank loans to NBFCs declined by 0.7 percent to Rs 1.5 lakh crore during the first seven months of the year.
Bankers also noted that the increase in gold loans could be due to a rise in its price, which gives borrowers an opportunity to repay old loans and get more new loans. Some analysts see the rising demand for gold loans as a sign of financial distress.
Last month, the RBI directed banks and finance companies to review their gold loan policies and procedures, directing them to rectify any deficiencies within three months. This followed a review that uncovered irregular practices, such as hiding bad loans through evergreens.
In the personal loan segment, the year-on-year growth in home loans was 5.6 percent. The home loan book of banks increased to Rs 28.7 lakh crore. Year-on-year growth in household credit stood at 12.1 percent, compared with 36.6 percent in October 2023.
The next highest growth was in credit card outstanding, which rose 9.2 percent to Rs 2.81 lakh crore in seven months. The increase in outstanding credit was in line with the increase in online transactions during the period. However, growth in other personal loans, including unsecured loans, remained sluggish at 3.3 percent.
Overall, bank credit increased by 4.9 percent to Rs 172.4 lakh crore, credit to industry increased by 3.3 percent.