Lenders see opportunities in golden niche

For Ravindra Bahandare, the source of cash to fund his textile trading firm was not a bank, but a 14-gram gold chain he pawned for Rs 20,000 at one of the thousands of gold loan offices mushrooming across India.

"My business has been slack for three, four months and I wanted a quick loan to fund my working capital," he said in Andheri, where he agreed to an interest rate of 24 percent for the jewellery, an amount typical for specialist gold lenders.

India's formal gold loan market is growing at 30 to 40 percent annually and attracting global interest.

Abu Dhabi Investment Authority and a Goldman Sachs fund are among investors in Muthoot Finance, India's largest specialist gold lender, which starts trading on Friday after a popular $200 million IPO.

Text: Reuters

Image: A salesman arranges gold ornaments during a jewellery show in India.

Reuters and AP Images