As the COVID-19 pandemic hit almost all the business segments leading to job loss and pay cuts in many organizations. The daily wage workers, small business owners, and lower-middle-class people are highly affected due to this crisis. The pandemic has led to a cash crunch scenario where unemployed and daily laborers are facing a terrible financial situation. People are in a very urgent need for money to solve their financial constraints.
Investing in Gold has been one of the traditional practices followed by the people where they can solve their immediate financial crisis by pledging it in the bank or other financial lenders. Gold is an asset class that gains value during the crisis and makes borrowing against it easier.
Indian households, among the world’s biggest hoarders of the community, have been pawning gold ornaments with lenders to tide over the pandemic. During this COVID-19 situation, there has been a very higher number of people opting for gold loans to solve their temporary cash crisis situation to meet their immediate needs.
With less transaction time and collateral that can be sold off quickly in cases of default it seems to be easier for the people to opt for gold loans.
Muthoot Finance Ltd India’s largest cash-for-gold lender by assets shoot up to 41% this year, beating all but two on the 103-member S&P BSE Finance index. The financial analysts who are tracking the stock markets still recommend buying shares of Muthoot Finance Limited. The shares of Muthoot can gain another 11% in the next 12 months according to the consensus of analyst estimates. When the nation is struggling with mounting bad loans, Muthoot Finance Ltd has seen its shares surge during the COVID 19 pandemic. Muthoot Finance has shown a decent 26% increase in its gold loan business and is also aiming for a 15% growth in the financial year 2021.
George Alexander Muthoot, MD of Muthoot Finance says that despite a higher base they are still looking to grow the gold loan business by almost 15% in the financial year 2021 and expect an increase in disbursements as the economic activity picks up.
Muthoot Finance has largely seen customers hailing largely from the MSME background, shop keepers, and Traders. Transforming into Digital space has been a huge advantage for the Muthoot group to excel in its business. The pandemic and the lockdown have shifted 40-45% of its customers to transact digitally which made the process much simpler. Muthoot Finance, which has 4567 branches throughout the country, has a larger presence in the southern part of India.
