RBI tightens compliance norms for gold loans; NBFC stocks fall
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Apr 10, 2025 | Page No.: 1 | Position: Middle Center | Source: Piyush Shukla | Sq Cm: 250 | AVE: 128526 | PR Value: 642630
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RBI tightens compliance norms for gold loans BFC stocks fall cannot keep the LTV ratio on their employees a move that Piyush Shukla gold loans above 75 per cent Lenders with higher gold loans could hurt bank partnerships Mumbai shares of gold loan NBFCs Ban k NBFC Overall advances Gold loans with fintechs for gold loans like Muthoot Finance and as of overall advances where sourcing assaying and The Reserve Bank of India Manappuram Finance fell by CSB Bank T28 915 cr 45 transportation of gold is RBI has unveiled draft up to 9 per cent done by a third-party to the guidelines on gold loans Federal Bank f2 33 lakh cr 13 bank tightening the compliance NEGATIVE MOVE South Indian Bank f86 966 cr 20 standards for lenders on as- The RBI s move is seen as a Muthoot Finance 1 11 lakh cr 84 WILL BENEFIT ALL saying the quality of gold negative for gold loan Manappuram Finance f44 217 cr 55 VP Nandakumar MD CEO monitoring end-use of funds NBFCs primarily due to the Source Companies Note Data as on December 31 2024 Manappuram Finance how- handling gold harsh penalty LTV limit They have brought ever said the RBI s decision for not returning gold on in higher uniformity via the to harmonise gold loan rules time to borrowers upon com- circular The regulator is through the tenor for gold harmonised regulations on and regulations will be bene- pleting loan repayment and stringent on banks maintain- loans extended for consump- NBFCs performance shall ficial for all stakeholders es- fixing the loan-to-value ing an LTV ratio below 70 per tion purposes and for the remain monitorable he pecially gold loan NBFCs as LTV ratio at 75 per cent cent NBFCs assign an LTV gold loans by NBFCs could said If the end use is for in- there is currently no level- Banks tend to keep the ratio at the time of sanction have some near-term impact come generation lenders playing field gold loan LTV ratio at 60-70 of the loan while banks do it on growth he said excluding NBFCs can pre- NBFCs have always been per cent while non-banking basis the maturity date of The additional provision scribe an LTV ratio as part of at a disadvantage compared finance companies NBFCs loans a senior banker said of 1 per cent in case of breach their policy he said How- to banks as the latter have ac- assign an LTV ratio of 70-80 According to AM Karthik in the LTV should however ever additional due dili- cess to cheaper funds are eli- per cent on gold loans The Senior Vice-President and be manageable for large gence including borrower gible to offer gold-based agri- RBI had barred IIFL Finance Co-Group Head Financial NBFCs operating in this seg- cash flow assessment and cultural loans enjoy higher in March 2024 from sanc- Sector Ratings at ICRA the ment considering their over- primary security creation LTV ratios and benefit from tioning gold loans due to ma- draft guidelines on gold loans all business yield and healthy process could be operation- favourable renewal policies terial supervisory concerns provide improved clarity on earnings performance ally onerous This scenario will change fol- including assigning a higher the applicable LTV for the Notwithstanding the The RBI also said lenders lowing the Central bank s LTV ratio lenders above the impact of the shall ensure that the gold col- latest decision which we As the regulator clarified The cap in the LTV at 75 evolving competitive envir- lateral is handled only in wholeheartedly welcome on Wednesday that NBFCs per cent on an ongoing basis onment in view of the new their branches and only by he said