Non banking finance companies (NBFCs) have managed to grab the biggest slice of market share in gold loan business thereby dropping the share of private sector banks from 13.7 %to 11.6%, 50.6% to 46.5% for public sector banks and 12.1% to 9.7% for the cooperative banks.

NBFCs themselves have on the other hand increased their market share to 32.2% from 23.6%, revealed data from Icra Management Consulting Services (IMaCS). Experts feel that the main reason behind this success by NBFCs has been customer intention of getting maximum value of loan in return for gold, lesser documentation and other formalities which means lesser adherence to KYC norms, swift and easier loan disbursal mechanism and also availability of locker facility.

"The loan-to-value ratio for a 22 carat jewellery piece typically varies from 55 per cent to 65 per cent by banks while it varies from 70 per cent to 80 per cent by NBFCs. Interest rates cha¬rged by banks and NBFCs also differ," said George Alexander Muthoot, MD, Muthoot Finance.

"It's true that NBFCs have done well, but we still control a sizeable portion of the market. We are studying the market and we will respond to competition, keeping the interests of consumers first," said M Narendra, CMD, Indian Overseas Bank.

IMaCS forecasts the gold loan market in India to rise by 35 to 40% in the next three years to come.