Gold has always been a popular investment choice in India. The sentiment towards gold investment is predominantly influenced by cultural and traditional practices, which consider gold as a symbol of wealth and prosperity. In recent years, the gold market has seen a surge in prices, which has had a direct impact on the gold loan segment. In this article, we will look at how gold price today in Bangalore have affected the maximum gold loan per gram and the state of the gold market.
Gold Price Today in Bangalore
Today’s gold price in Bangalore is determined by the global market, which takes into account several macroeconomic factors. These factors include inflation, currency fluctuations, interest rates, economic policies, and geopolitical tensions. The demand for gold also affects the gold price today in Bangalore. Typically, gold demand comes from two primary sources – jewelry and investment.
Jewelry is the largest segment of gold demand in India, accounting for nearly 50% of the total gold demand. India is the second-largest consumer of gold in the world, behind China. Indians have a longstanding tradition of buying gold on auspicious occasions such as weddings, festivals, and religious ceremonies. The demand for gold jewelry remains steady, with no significant changes in the recent past.
Investment demand for gold in India has been on a rise in the past few years. The economic instability caused by the Covid-19 pandemic has led investors to seek the safe haven of gold as a hedge against inflation. The increase in investment demand for gold has been one of the primary reasons for an increase in gold prices in Bangalore.
Maximum Gold Loan per Gram
Gold loans are secured loans that are offered against the collateral of gold. Banks, non-banking financial companies (NBFCs), and gold loan companies offer gold loans to individuals who require funds for personal or business purposes. The maximum gold loan per gram is determined by gold prices in Bangalore. Typically, the maximum gold loan per gram is calculated based on the prevailing gold price in the market.
Gold loan companies offer a loan to value (LTV) ratio that determines the maximum loan amount that can be sanctioned against the gold collateral. The LTV ratio is determined by the gold prices in Bangalore. For example, if the LTV ratio is set at 75%, and the current gold price in Bangalore is Rs. 4,500 per gram, then the maximum gold loan per gram would be Rs. 3,375 (75% of Rs. 4,500).
Impact of Gold Prices on Maximum Gold Loan per Gram
The increase in gold prices in Bangalore has had a direct impact on the maximum gold loan per gram. As a result of the increase in gold prices, the LTV ratio has decreased, which has led to a decrease in the maximum gold loan per gram.
In March 2020, the gold prices in Bangalore were around Rs. 4,000 per gram. The LTV ratio offered by gold loan companies was around 85-90%. This meant that for every gram of gold pledged, the borrower could avail a loan of Rs. 3,400 – Rs. 3,600. However, in August 2021, the gold prices in Bangalore were around Rs. 4,600 per gram. The LTV ratio offered by gold loan companies had decreased to around 70-75%. This meant that for every gram of gold pledged, the borrower could avail a loan of only Rs. 3,220 – Rs. 3,450.
The decrease in the maximum gold loan per gram has made it difficult for borrowers to avail the required funds, which has led to a decrease in demand for gold loans. In the short term, it has also affected the business of gold loan companies.
State of the Gold Market
The gold market in India is currently in a state of flux. The Covid-19 pandemic has led to an increase in investment demand for gold, which has led to a surge in gold prices in Bangalore. However, the increase in gold prices has led to a decrease in demand for gold jewellery, as consumers find it challenging to afford the high prices.
The Indian government has taken several measures to tackle the high gold prices in the country. The government has increased import duties on gold to discourage imports and has launched the Sovereign Gold Bond Scheme to encourage investment in non-physical gold.
Conclusion
Gold prices in Bangalore have a significant impact on the maximum gold loan per gram. The increase in gold prices has led to a decrease in the maximum gold loan per gram, which has affected the gold loan segment. Furthermore, the state of the gold market is in a state of flux, with investment demand for gold on the rise, while demand for gold jewellery is on the decline. The Indian government is taking measures to tackle the high gold prices in the country, and it remains to be seen how these measures will affect the gold market in the long term.