Mumbai. The Reserve Bank of India (RBI) has given a very strict warning to banks and gold loan companies. RBI has expressed displeasure over the shortcomings in gold loan distribution. After this, the gold loan industry is now planning to start monthly redemption scheme. Under this, banks and gold loan companies can ask consumers to repay the loan along with interest and principal in monthly installments after the loan is initiated. Banks giving gold loans are also exploring the recurring loan route to give loans against gold.
According to an ET report, a senior banking official said, “The RBI order is clear, it wants gold loan companies to check the repayment capacity of the loan taker and not depend only on the pledged jewellery, so we are now “We are preparing monthly payment options for the loan.”
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What did RBI say in the circular
In a circular on September 30, RBI had pointed out irregularities in giving loans against gold ornaments and jewellery. This happened after the central bank found problems in matters like sourcing of gold loans, valuation, auction transparency, monitoring of LTV ratio and risk weighting. The bank regulator also found that it is a bad practice to extend gold loans with only partial payment.
Now preparing for new payment option
As a practice, banks offering gold loans offer the option of bullet repayment gold loan, wherein the borrower can repay the entire amount at the end of the loan tenure. They are not required to make any EMI wise repayment.
Another option is to make partial payments whenever the borrower has funds available. But, after RBI’s concerns and warnings on this, banks and NBFCs are considering monthly payment plans to improve the repayment system in gold loans.
Tags: business news, gold investment, gold loan
FIRST PUBLISHED: November 19, 2024, 18:21 IST
