RBI Loan Rules: In a major alteration to gold loan operations, the Reserve Bank of India has decreed that obtaining a loan against gold will no longer be so simple like before. The recently issued guidelines of RBI determine that banks and financial institutions will have to place certain conditions. This decision will especially be adversarial to those planning to take a loan on bullion or gold bars.
Loan Will Be Only Against Jewellery And Coins
Gold loan stands hereby placed only against gold jewellery or bank-approved coins, according to the new bank guideline. This means options such as bullion, gold bars, or e-gold will not be considered worthy of loan. Hence, it is clear that only those persons with the traditional gold jewellery or coins approved by the bank shall be entitled to obtain the loan. This would also apply to non-banking financial companies under this new rule.
Ministry Sought Relaxation Of Rules
Prior to rendering these new instructions effective, it has been urged by the Ministry of Finance that some relaxation may be accepted by the RBI. The Ministry wants these rules to exclude gold loans of value up to ₹ 2 lakh so that it does not bear directly on the common man, and asked that they should be put into effect on a staggered basis to allow reasonable time to the banks and the borrowers for preparations. This will smoothen the acceptance of the policies.
Increasing Gold Price Is A Great Reason
RBI has effected this change while gold prices inside the country have been rising continuously. At present, 24-carat gold is priced at around ₹ 95,760 per 10 gm. Meanwhile, 22-carat gold is being sold around at ₹ 87,780 per 10 gm. With this price rise, taking gold loans has also been on the rise. People are taking exorbitantly priced gold on mortgage to draw a handsome amount of money from the banks, which is a big pressure on the banking sector.
Increase In Number Of NPAs
Another big challenge in front of banks and financial institutions is that incidents of defaulters are increasing in repaying gold loans. The borrower is unable to pay the loan amount and hence such a loan is treated as NPA. When the loan turns to NPA, it is disturbing the financial position of the bank. Hence, RBI has come forward to control the situation by insisting upon strict rules so that the risk is minimized in future.
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