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Gold loan market to grow to over Rs 3 lakh cr by 2020: KPMG

The average gold demand in India is estimated to go up to around 850 to 950 tonnes per annum by 2020, with two-thirds of this demand coming from the rural India

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The organised gold loan market in India is expected to grow to over Rs 3 lakh crore by 2020 at a three-year compound annual growth rate (CAGR) of 13.7 percent, British consulting multinational KPMG said on Tuesday, citing its report based on an industry survey.

The report titled “India’s gold loan market: Is the glitter fading?” cites the World Gold Council which estimated last year that average demand in the country would go up to around 850 to 950 tonnes per annum by 2020, with two-thirds of this demand coming from India’s rural market.

“Industry projections say the organised gold loan market in India will grow to Rs 3,101 billion (Rs 3.1 lakh crore) by 2020 at a three-year CAGR of 13.7 per cent,” quoting a KPMG release, IANS said.

India is one of the largest consumers of gold which had an estimated total stock of 23,000 tonnes in 2016, the majority of which is held by households, according to the report.

“With the country’s growing population and ever increasing disposable income, India’s fondness and inclination for gold has also increased manifold,” the report said.

There are broadly two categories of gold loan lenders in India. The formal sector consists of banks, non-banking finance companies (NBFCs) and cooperatives, while the informal sector is made up of categories like local moneylenders and pawnbrokers.

According to KPMG, gold loan companies are expected “to continue delinking the gold price volatility risk by offering more variants of lower tenure loan products”.

Noting that increased competition from small finance banks are having a yield reducing impact, the report said the gold loan space is likely to see “interesting partnerships with fintechs (financial technology companies) to help streamline and automate processes”.

The report has identified factors such as exclusion from mainstream personal and retail loans by commercial banks, and changing attitudes to applying for gold loans, as the growth drivers of the gold loan market in India.

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