North India Statesman
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Mumbai: While consumer expenses are decreasing even during the wedding season due to the high price of gold, the jewelers have to pay a margin call to borrow gold from banks, resulting in a cash crisis. Since January this year, gold prices have increased by about 16 percent.
Twenty to twenty percent of jeweler in the jewelery industry depend on gold metal loans from banks to maintain cash and stock.
Jehri borrows gold from banks in gold loans, make jewelery from it and sell it and return money or gold to banks.
Banks usually provide gold metal loans for 180 days. Instead of buying gold, jeweler borrows gold (as bar) to make jewelery and earn money by selling.
The total size of the gold metal debt market in the country is about 120 tonnes. Recently there has been a significant increase in gold prices, which has affected the sale of jewelery. Market sources said that banks are seeking margin calls from jewelery vendors due to the sales recession.
However, the demand for jewelery is expected to increase during the upcoming festive season. Jewelers are facing double hit as margin calls and lease rates have also increased. The high price of gold in the international market and the rupee’s weakness against the dollar has also made gold imports expensive.
It is noteworthy here that due to the high price of gold, there has also been an increase in the amount of loan in exchange for gold recently. According to January data, banks’ gold loans portfolio saw an increase of 76 percent year after year. In January 2024, the gold loan portfolio increased by 17.40 percent year after year.
The data of the Reserve Bank shows that the gold loan portfolio is growing at a rate of 50 percent per month since September last year. The recent increase in borrowing in exchange for gold jewelery is due to strict norms for unsafe loans. I was forced to apply it.
