A Russian company is planning to set up shop in India’s GIFT City, an international financial services center, to sell gold to Indians crazy for the yellow metal.

PJSC MGKL, the holding company of Russian pawnshop chain Mosgorlombard, said it will register at the financial center in the western Indian state of Gujarat to enter the capital market.

Mosgorlombard will start with installing automated terminals for the purchase and sale of gold and silver, Interfax reported.

The next step will be to set up a company in India to offer loans secured by gold.
Last year, Indian households held a staggering 34,000 tons of gold, CNBC reported, quoting Morgan Stanley, with some estimates valuing it at $5 trillion. The gold loan market in the country has outstanding portfolios of $225 billion.

Still only 10-12% of household gold is currently pledged, leaving massive room for growth for companies such as Mosgorlombard.

Mosgorlombard is a major pawnshop chain and resale platform that offers instant short-term loans against jewelry, furs, and electronics.

“Considering the scale and maturity of the gold-backed loans market in India, we expect strong demand for contactless acceptance of gold items,” MGKL CEO Aleksey Lazutin said in a statement.

MGKL also operates in the wholesale purchase and processing of precious metals. In April, Indian rating agency CareEdge Global gave a long-term local currency credit rating of B- to MGKL, with a stable outlook.

Entities in GIFT City, modeled on the lines of other global financial centers such as Singapore’s Marina Bay and Dubai’s DIFC, are allowed to transact in foreign currencies, make use of tax incentives, and tap India’s booming financial ecosystem.

The banking asset size of the center exceeds $100 billion.