Shriram City eyes four-fold rise in gold loan portfolio in five years

Plans aggressive expansion in north India, where it has already launched its product in 70 branches

Shriram City Union Finance Ltd. (Shriram City), a part of the Shriram Group, has set a target of increasing its gold loan book by nearly four-fold to Rs 20,000 crore in the next five years, a top company executive has said.

The company hope to achieve this through aggressive expansion in North India, after the completion  of the current merger process. It has already announced the launch of its gold loan product in 70 branches in Punjab, Rajasthan, Haryana, Himachal Pradesh, Jammu & Kashmir, New Delhi, and Uttaranchal to address the growing demand of the product. The company has a strong gold loan franchise in southern India and aims to replicate the success in the northern region.

At present, Shriram City’s gold loan book stands at Rs 4,110 crore. “We will target growing the gold book to Rs. 15,000-20,000 crore over the next five years. In South India, we have a strong franchise for gold loans, and the majority of our business comes from this region. We will replicate in the north the best practices that have worked for us and look at profitable growth Pan-India,” said Y S Chakravarti, managing director and chief executive officer, Shriram City  

“There is a great opportunity, and immense affinity toward physical assets in India, and gold shines the brightest among them. We initiated our approach of lending to the credit-tested customers of Shriram, and have seen strong demand, good credit quality, and no stress on repayments,” he added.  

Demand for gold loans has especially risen for the last two years, where Shriram City’s portfolio has contributed 13 per cent of the assets under management (AUM) as of December 2021, against 10 per cent in the previous year. Overall, gold loan disbursals have observed a healthy growth of Rs. 4,610 crore in the nine months of FY22 compared to Rs 4,140 crore year-on-year, indicating better trends in FY23. “Interestingly, the perception towards taking a gold loan is slowly changing, and Gold loans are also emerging as an all-weather loan. Today, gold loan as an asset class is one of the most convenient resorts to avail easy credit to address the immediate financial requirements of individuals/businesses,” said a company statement.

The statement added that going forward, the company is targeting an average gold loan ticket size in the range of Rs 50,000, with limited Loan to Value (LTV) at 75 per cent, leaving the scope of the marginal requirement for additional margins in times of adverse gold price fluctuations. Over a period, the company has seen the life of its loan in the range of 5-6 months despite the usual tenure norm of 12 months, reflecting the borrower’s propensity to repay.