NEW DELHI: With time running out, Praveen Garg scrambled to find the US$6,000 (RM20,400) he still needed to buy a fancy, five-bedroom apartment with a park view.But his relatives and friends refused him, and the bank turned him down for an emergency loan because he did not have the proper tax documents for his small shoe business.
Left with no other options, he did the unthinkable: He pawned his wife’s gold jewellery and his mother’s, an act many Indians consider a disgraceful sign of desperation.
“It was a very difficult decision. I had to swallow my pride like a bitter pill,” Garg said as he opened a red velvet jewellery box and handed his wife’s wedding bangles, necklace and earrings to a gold loan executive at a bank in New Delhi.
“If people in my neighbourhood find out, they will ridicule us.”
Though seeking a gold loan was culturally bold, Garg said it was more private than going to a neighbourhood moneylender.
Nearly every middle-class Indian family owns gold jewellery, which is central to weddings and rituals, and few traditionally have been willing to part with it to secure loans.
But with gold prices soaring, banks have begun to push customers toward gold loans. The transactions have become even more popular as small personal lending dries up because of rising defaults on risky loans.
“India is one of the largest consumers of gold in the world, and about 90 per cent of the gold in India lies with individuals and not in banks,” said Biju Pillai, executive vice president of HDFC Bank, which has the largest share of gold loans among Indian banks.
“But the paradox is that gold is the least leveraged product for loans. We want gold to come out of the closet.”
The bank’s gold loan business grew 55 per cent last year, he said.
The market is huge, but so is the cultural barrier.
Over the years, many melodramatic Bollywood movies have reinforced the stigma, portraying the sale of gold as a sign of a man’s inability to earn a living.
The taboo is so deep-seated that Indians were shocked to shame in 1991 when the government pledged its gold deposits abroad to borrow money during a crunch.
Through a string of television, radio and print advertisements in the past few months, banks and finance companies aggressively are pushing Indians to shed their inhibitions. Many advertisements show women initiating the decision.
In one commercial, when a sari-clad woman gently suggests pawning her gold jewellery to upgrade the family store, her husband leaves the dinner table in a huff, mouthing a cultural cliche: “I am not in such a bad way that I have to pawn off my wife’s jewellery.” — WP-Bloomberg