Gold Loan Service
Project Report
On
Gold Loan Service in India
Subject:
Management of Financial Services
Submitted to: Submitted by:
Dr. Sanjay Medhavi Mayank Raj MBA III sem. Roll no. 28
Department of Business Administration
University of Lucknow
Introduction:
Gold considered an auspicious metal is opening up business opportunities in India. Largely driven by the unorganized segment in the past, most of whom included the pawn brokers, the gold loan market has now started to be driven heavily by the organized segment. The stigma attached to pledging gold is slowly thinning among people while companies are campaigning that gold is an effective assistant at the time of financial need. Express loan within 5 minutes is the most attractive feature of this loan product offered by almost all the market leaders.
The Characteristic of the gold loan product is that the average tenor of the loan is about 90 to 100 days. Investors have found this product attractive with short term tenor. Moreover, the risk involved in the product is less. Gold loan companies offer loan against a LTV (loan to value) ratio of about 75 to 80% which makes it less risky. Any movement of gold prices that makes the value of the security to fall below the loan offered would make the company exercise a margin call or cancel and issue a fresh loan. The sentiments attached with the gold ornaments pledged also makes gold loan less risky
With the success of many players, many institutions have identified that this business model is not hard to replicate. But in almost all the business models, one has to identify the sustainable source of competitive advantage. In case of gold loan market, 80 to 85% customers are repeat customer. Hence the source of competitive advantage would be the trust that private institutions can build over time and transparency in the process.
On
Gold Loan Service in India
Subject:
Management of Financial Services
Submitted to: Submitted by:
Dr. Sanjay Medhavi Mayank Raj MBA III sem. Roll no. 28
Department of Business Administration
University of Lucknow
Introduction:
Gold considered an auspicious metal is opening up business opportunities in India. Largely driven by the unorganized segment in the past, most of whom included the pawn brokers, the gold loan market has now started to be driven heavily by the organized segment. The stigma attached to pledging gold is slowly thinning among people while companies are campaigning that gold is an effective assistant at the time of financial need. Express loan within 5 minutes is the most attractive feature of this loan product offered by almost all the market leaders.
The Characteristic of the gold loan product is that the average tenor of the loan is about 90 to 100 days. Investors have found this product attractive with short term tenor. Moreover, the risk involved in the product is less. Gold loan companies offer loan against a LTV (loan to value) ratio of about 75 to 80% which makes it less risky. Any movement of gold prices that makes the value of the security to fall below the loan offered would make the company exercise a margin call or cancel and issue a fresh loan. The sentiments attached with the gold ornaments pledged also makes gold loan less risky
With the success of many players, many institutions have identified that this business model is not hard to replicate. But in almost all the business models, one has to identify the sustainable source of competitive advantage. In case of gold loan market, 80 to 85% customers are repeat customer. Hence the source of competitive advantage would be the trust that private institutions can build over time and transparency in the process.