RBI is concerned about gold loan increase in India..!?

Sowmiya Sriram
RBI is concerned about gold loan increase in India..!?
The Reserve bank has expressed concern about the irregularities taking place in this regard as the trend of taking loans against gold is increasing in India. Generally, indians immediately pledge the gold at home if there is an urgent need and convert it into cash. Currently, not only banks but also non-bank financial institutions and small finance companies are providing loans against gold jewelry. However, the Reserve bank has expressed concern that many irregularities are taking place. According to the information released by the Reserve bank, the rate of gold loans in india has increased significantly in september 2024 compared to september 2023. This shows that common people are pledging gold as collateral to meet their financial needs. However, the Reserve bank has also expressed concern about some lending institutions and borrowers engaging in illegal practices.
The Reserve bank of india, which has said that it has issued new guidelines on september 30 to resolve these problems, has asked gold lending institutions to follow the policies, processes and procedures for gold loans. The Reserve bank has mentioned in its guidelines that serious attention should be paid to discrepancies in the valuation of gold, lack of due diligence, possible shortcomings in outsourcing procedures, and management of the purpose of the loans taken. It has been said that our aim is to ensure that the growth of lending institutions should be sustainable and free from malpractices. The main reason for these instructions from the Reserve bank is that non-banking financial institutions continue to dominate the gold loan segment. As of march 2024, 59.9% of the total gold loans given by banks and non-banking financial institutions are with non-banking financial institutions.


That is, people find it easier to get loans from non-banking financial institutions than to go to banks and get gold loans. At the same time, the report also indicates that the rate of lending in retail loans other than gold has decreased in india, and the Reserve bank says that the growth of unsecured personal loans has not been significant since september 2023. The growth rates of microfinance and self-help group loans have declined by more than two-thirds in the last year, the Reserve bank says. Therefore, it has asked companies to strictly follow the Reserve Bank's guidelines to prevent irregularities in the gold loan sector.
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