New Delhi: COVID-19 crisis altered the already-plunged of the economic landscape in India. As borrowing from loans is getting tighter, people, especially farmers in need, are mortgaging family gold to secure funds from banks.
Usually, crop-loans at state-run banks require lengthy documentation. Also, the banks are unwilling to lend during the ongoing pandemic situation fearing severe default payments.
High indebtedness has long plagued the country’s farmers and is said to be one of the reasons for suicides among the farm community. Rough patches in the agriculture sector have often necessitated broad, populist farm loan waivers which often demand a good percentage of the government’s expenditure.
Desperate for quick short-term funds, gold-backed loans thus are becoming popular among farmers. However, as the further contraction of the economy expected, there are growing concerns whether these personal loans can repaid.
Pawing gold as collateral for loans is seen as a ‘secured’ way of obtaining loans as against unsecured loans. Several state-owned and private banks too are luring the customers with promotional offers around this kind of loan. However, this will further increase the incidence of indebtedness among farmers.