Generally, using gold as a collateral to get advances is termed pawning. Pawning is become popular practice of getting funds quickly and redeem pawned article when funds are available. Banks also treated pawning as a risk free transaction and raised the limit of advances close the market price of gold. Although pawning is only a type of financial inter-mediation, it differs from other methods.

I shall be grateful if someone help me to know the theory behind pawning.

Upananda