Challenges faced by Gold Loans in National and International Arena

Gold loans are believed to be one of the most flexible yet feasible investments. Owing to the ease of operating a positive business environment it comes with growing liquidity that generates through the procedural functions and activities of business elements. In India, we can easily structure the advantages that gold loan offers and subsequently in the economy. But the conservative approach to gold loans has been one of the biggest impediments in the gold loan growth market.Indian citizens are wary of parting their assets. They believe more in sensing insecurity as it is the notion that they have been a part of the gold. But in a positive sense, it is not abducted by the banking institutions as it would not be repaid in the principal amount of the loan. Such a crucial gesture is considered to be one of the most prevalent in rural areas where people not only possess adequate information but confirm how banking institutions operate and tend to restrict the tendency to go for opting loans from the banks.

Thus it is believed to be the most important act to not only confirm the identity of the facts that encourage the growth of the gold loan market but adequate measures could be a major requirement to minimize the problems that can be rectified and suggest suitable measures. The presence of certain hurdles, difficulties, and challenges have impacted the growth of the gold loan market from an economic viewpoint. Following are the incremental challenges that will impact the growth of the gold loan market in the economy.

Proper Management of the Collateral Security Deposit: One of the biggest challenges associated with the functioning of a Gold loan is the proper servicing of a loan through the proper maintenance of the collateral security deposited by the borrowers to the Bajaj Finance gold loan. Before we understand how collateral security deposit functions we can first define the term collateral security deposit and how it operates in the environmental surroundings. For example- collateral security deposits refer to the gold jewelry and ornaments which are deposited by the borrower to the banking authorities and an equivalent monetary amount of the loan is disbursed by the banking authorities. Thus the gold loans can only be disbursed properly and efficiently if the management authorities of the private banking commercial institutions can manage the organizational system associated with the functioning of the collateral security management and therefore it is very important to manage the functioning of the gold loan management authorities.

Ensuring the Loan To Value Ratio is correctly proportioned: In the functioning of gold loans, the concept of Loan to Value Ratio assumes a very important role. When we define the term LTV ratio we say that it is the equivalent amount of money that can be equated from the amount of gold that has been deposited to the private commercial banking authorities. The Loan To Value Ratio is 75% in the case of private commercial banking authorities and therefore it means that 75% of the gold deposited to the private commercial banking authorities has been converted into cash and thus the disbursed cash amount can be further utilized into productive economic activities and has thus improved the climate of investor sentiment and investment growth in the country.

Conclusion: Thus it is extremely important to understand the challenges that are faced by the authorities disbursing gold loans and how they impact economic functioning in the societal structure. If you have any queries about the gold loan, let us know in the comment section. Our executives will get back to you with the solution within the minimum period.