RBI: Tighter regulations on gold jewel loans

 At a time when the credit offtake in the banking system is not picking up, the RBI (Reserve Bank of India) has a different problem to contend with in the form of loans agains  gold jewel which is growing very fast.

The listed gold jewel loan firms, Manappuram Finance & Muthoot Finance reported a strong growth in earnings for the 3rd quarter as compared with the overall demand for loans in the corporate segment seeing a considerable decline.

According to a RBI official, ''In the given situation, RBI is now contemplating tighter regulations for the segment, which could be in the form of limits on the loan that a gold loan firm can give as a percentage of the value of mortgage. This is also known as the loan-to-value" .

For instance, if loan was being given up to 85% of value earlier, RBI may now think of prescribing up to 70% only. The RBI may also restrict the maximum interest that a gold loan firm can charge its customers, and also the penalties that gold loan firms can impose. Currently, they charge 16 to 25% as interest.

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