Kolkata: Gold loans are becoming popular in India. Whether due to financial stress or due to a rising inclination of unlocking bigger value from gold, since price of the metal is on a bull run, more and more people are taking their gold to gold loan companies and banks/NBFCs. The changes in gold loan regulations that RBI has suggested are mostly aimed at facilitating the smaller ticket loans. The new norms will be applicable from the first day of the next financial year.
The new framework was released on June 6 after RBI governor Sanjay Malhotra mentioned about it at the briefing following the Monetary Policy Committee meeting when the 50 points basis point Repo Rate cut and the CRR (cash reserve ratio) cut were announced. These rules will apply to all entities in the gold loan business including banks, cooperative banks, NBFCs and housing finance companies. These will also apply in the case of silver.
LTV raised
Smaller ticket loans will be benefitted by this measure. Borrowers will get 85% of the value of the gold as loan. This is a significant jump from the current rate of 75%. This will be applicable to loans up to a maximum amount of Rs 2.5 lakh. If the metal one is pawning is worth Rs 1 lakh, the maximum amount of loan available will be Rs 85,000 from the current Rs 75,000.
No credit appraisal
This step is another measure that will help the smaller ticket loan seekers. If one is looking for loans under Rs 2.5 lakh, there will be no credit appraisal. Credit appraisal involves assessment of the applicant’s income. It will make life easier for a large number of people who want to pawn gold at times of financial stress.
Other significant measures
The new policy lays down that there will be a limit on the gold and silver one can pledge. It is 1 kg if gold ornaments are being pledged, 50 gms in case of gold coins, 10 kg for silver ornaments and 500 grams for silver coins. These ceilings will be applicable per borrower.
Bullet loan repayments must take place within 12 months from taking the loan. Moreover, lenders cannot sit on the metal pawned for a loan after the loan has been extinguished. Lenders should return the gold or silver on the same day of loan closure, or within 7 working days at the most. If the return is delayed, the lender should pay Rs 5,000 a day to compensate. If somehow the pledged metal is lost/damaged during audits or return, the borrower must be compensated in full by the lender.
All communication — terms of the loan and valuation etc must be conveyed in the language in which the borrower is comfortable. An independent witness must be present when an illiterate applicant is briefed.
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These rules are extremely significant since they involve getting more loan by pawning the same amount of gold as well as no credit appraisal for smaller ticket loans, which are all designed to help the small borrower. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
