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Gold lending rates have come under pressure due to competition among non-banking financial firms. This is evident from the rate cuts and comments from various gold lending players.

In addition, there was a notification on the harmonization of regulation of microfinance institutions, which broadened the target market of NBFC-MFIs and also enabled their diversification into secured assets.

While the target customer segment for gold lenders and MFIs remains different, current yields remain within a similar range for gold lender financiers and MFI players.

As such, expanding the reach and product basket of NBFC-MFIs may impose an upward ceiling on gold lending rates. However, the MFI subsidiaries of most of the major gold lending players had good balance sheets through FY22 to date, with the exception of FY21 and the nine months of FY22 when it was affected due to the pandemic led by Covid-19.

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