The draft of the guidelines proposes that the lenders must link the reimbursement capacity of the borrowers to the approved amount of the loan. | Photo credit: Istockphoto
The draft of the Bank of the Reserve of India (RBI) on gold loans, despite offering clarity about loan practices, could increase operational complexity for lenders, said Fitch Ratings in a statement on Tuesday. However, gold press specialists such as Muffoot Finance and Manpppuram Finance should be able to adapt to new requirements.
The draft of the guidelines proposes that the lenders must link the reimbursement capacity of the borrowers to the approved amount of the loan. They also provide better orientation on regulatory loan to value calculations (LTV). Both thesis measures, said Fitch, raises the bar for lenders. The adoption of additional procedures to evaluate the income of the borrower could prolong the response time of the loan and increase operating expenses.
Although lenders can introduce subscription measures to meet the proposition requirements for individual consumption loans, such evaluations may not be precise for rural and semi -urban customers, which generally have variable gains.
NBFC question
“The drafts of the rules also require that lenders be cash flow evaluations for general revenue gold loans. We believe that NBFCs are less likely of such loans, since the subscription process can be too important that the capital of the ruliets would be classified as revenue generating loans, but if it is so, this could significantly slow down a significant source of credit for the rural economy,” he said.
The LTV ratio of NBFCS gold loans with 75 percent strengthens the financial shock absorber against the fluctuations of advertising gold prices. However, the requirement would reduce the effective LTV in the origin of the loan, potentially reducing the attractiveness of the product to the borrowers. To address the change, NBFCs can adjust their loan structures offering shorter bullet reimbursement loans or amortization reimbursement schedules. However, these changes would require an adjustment in customer behavior and could cause growing morboss if borrowers take longer to adapt.
“The lenders must reserve a provisioning charge of 1 percent on the loans that fail to comply with the LTV limits. This acknowledges that it can be difficult to rectify the infractions through collateral calls or refund notices when Gold Presawe Meagin the collateral price falls,” said Fitch. Finnish
Posted on April 15, 2025
