How Gold became a savior of liquidity in Covid Lockdown
Needless to say, gold is the most ancient and traditional asset for investment in India which has its history several years back. And rightly so, because there was a time when India was also referred as ‘Sone Ki Chidiya.’ It is the only form of asset which is unanimously accepted by each and every Indian without a second thought due to its characteristic of usability and physical presence. Today, the same gold has turned out to be a blessing in disguise and once again proved its worth in this difficult and challenging times when everybody is battling liquidity crises due to lack of income in this global halt.
We all are aware that the Atmanirbhar Bharat announcements made by our honorable Finance Minister in the 2nd and 3rd week of May’20, has a lot in stores for MSME sector. But what it actually talks about is RE-FINANCING (replacing existing debt with the new one) or extending loans to the already existing borrowers and not about fresh FINANCING. Hence, all the banks and financial institutions are shying away from giving fresh loans, thus, living the question of beating the liquidity crises for those with no loans as on the stipulated date unanswered. Not only that, even in case of refinancing or loan extension, irrespective of a lot of relaxations in norms, with the limited work force in action at banks and financial institutions, the process of refinancing has become bit more time consuming.
With the situation of pay cuts, job loss, erosion of savings and businesses resuming gradually to all parts of India with the continuous risk of exposure to the pandemic, it has become imperative for all to have liquidity cushion at least enough for survival for another 3 to 6 months from now on. In such scenarios, gold has proved its reliability and is playing a role to rescue people out of the liquidity crises with immediate effect.
A lot of banks and financial institutions are promoting gold loans with instant approvals and on the spot loan facility. In fact, some of them have gone on to set up special branches to make the most of this opportunity. The major reason behind this is that firstly the bank gets a physical asset in exchange against the loan, removing the risk of uncertainty of default in repayment and secondly, with gold prices at its peak, the consumers are getting a good value for their gold ornaments, creating a win-win situation for both, lenders as well as borrowers.
Thank You !!!
Bhupesh P Chaudhri