In India, gold-based finance is booming

CLOSING TIME for the Kondapur branch of Muthoot Finance, in Hyderabad, is usually 5.30pm on a Monday. But on August 10th it was only two hours later that the manager, Haripuri Padmavati, and her five colleagues, could shut the doors. More than 150 customers had visited the gold-backed lender, six times as many as on a Monday before covid-19. Among the borrowers were those caring for infected family members; those who had lost their jobs but had big bills, such as school fees, to settle; and business owners needing to pay creditors and employees. The average loan size was 50,000 rupees ($700).

The pandemic has meant huge uncertainty about banks’ loan losses. Business at Muthoot, though, is booming. Loans are extended for a year in exchange for collateral in the form of gold—usually a bangle or necklace of the sort that lights up Indian weddings. The entire lending process usually takes 15 minutes. Jewellery is weighed, then scratched on a small square stone. Acid and salt are applied to the scratch, to test purity; 5-10% of items fail. With experience, says George Alexander Muthoot, the company’s managing director, you can tell by touch. In a video call with your correspondent, he demonstrates by putting a chain in his palm, flopping his hand to the left and right, and then opening up his fingers with a nod and a smile: appraisal done...