{"id":45819,"date":"2025-04-15T01:18:52","date_gmt":"2025-04-14T19:48:52","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=45819"},"modified":"2025-05-08T02:36:13","modified_gmt":"2025-05-07T21:06:13","slug":"rbi-proposes-new-guidelines-to-regulate-gold-loans-amid-rising-npas-loan-disbursals","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/rbi-proposes-new-guidelines-to-regulate-gold-loans-amid-rising-npas-loan-disbursals\/","title":{"rendered":"RBI Proposes New Guidelines to Regulate Gold Loans Amid Rising NPAs and Loan Disbursals"},"content":{"rendered":"<h2>What\u2019s in Today\u2019s Article?<\/h2>\n<ul>\n<li>RBI Gold Loan Guidelines Latest News<\/li>\n<li>Surge in Gold Loan NPAs<\/li>\n<li>RBI Flags Irregular Practices in Gold Loans<\/li>\n<li>Draft Guidelines Released<\/li>\n<li>The Attractiveness of Gold Loans<\/li>\n<li>RBI Gold Loan Guidelines FAQs<\/li>\n<\/ul>\n<h2>RBI Gold Loan Guidelines Latest News<\/h2>\n<ul>\n<li>The Reserve Bank of India (RBI) is introducing a framework for gold loans amid a sharp rise in gold loan outstanding and non-performing assets (NPAs).\u00a0<\/li>\n<li>The surge in gold prices has led to increased gold loan disbursals, with NPAs rising by 28.58% and loan outstanding by 27.26% over the past year.\u00a0<\/li>\n<li>The new framework aims to regulate the gold loan segment and mitigate potential risks.<\/li>\n<\/ul>\n<h2>Surge in Gold Loan NPAs<\/h2>\n<ul>\n<li>Gold loan NPAs rose sharply by over \u20b91,500 crore to \u20b96,824 crore as of December 2024, compared to \u20b95,307 crore a year earlier.<\/li>\n<\/ul>\n<h3>Break-Up of NPAs<\/h3>\n<ul>\n<li>Commercial banks reported gold loan NPAs of \u20b92,040 crore, up from \u20b91,404 crore in December 2023.<\/li>\n<li>NBFCs reported NPAs of \u20b94,784 crore, compared to \u20b93,904 crore last year.<\/li>\n<\/ul>\n<h3>Gold Loan Outstanding Growth<\/h3>\n<ul>\n<li>Total gold loan outstanding of banks and NBFCs stood at \u20b911,11,398 crore in December 2024, rising from \u20b98,73,701 crore a year ago.<\/li>\n<\/ul>\n<h3>Banks&#8217; Share<\/h3>\n<ul>\n<li>Commercial banks held the majority share with \u20b99,23,636 crore in gold loan outstanding.<\/li>\n<\/ul>\n<h2>RBI Flags Irregular Practices in Gold Loans<\/h2>\n<ul>\n<li>A review by the RBI revealed several deficiencies in gold loan practices, including:\n<ul>\n<li>Use of third parties for sourcing and appraisal without proper oversight<\/li>\n<li>Valuation of gold in the absence of the customer<\/li>\n<li>Inadequate due diligence and end-use monitoring<\/li>\n<li>Lack of transparency in gold auctions after defaults<\/li>\n<li>Weak monitoring of Loan-to-Value (LTV) ratio<\/li>\n<li>Incorrect application of risk weights<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3>RBI Directives to Lenders<\/h3>\n<ul>\n<li>The RBI instructed banks and NBFCs to review their gold loan policies and processes, identify gaps, and take corrective measures within a set timeframe.\u00a0<\/li>\n<li>It also emphasized strict monitoring of the gold loan portfolio and greater control over outsourced activities and third-party service providers.<\/li>\n<\/ul>\n<h3>Curbing Evergreening of Loans<\/h3>\n<ul>\n<li>Previously, borrowers could repledge jewellery by just paying interest, enabling indefinite loan extensions.\u00a0<\/li>\n<li>Post RBI intervention in September 2023, repledging now requires full repayment of principal and interest, making the process costlier and limiting loan evergreening.<\/li>\n<\/ul>\n<h2>Draft Guidelines Released<\/h2>\n<ul>\n<li>On April 9, the RBI issued draft comprehensive guidelines for gold loans.<\/li>\n<\/ul>\n<h3>Prohibited Collateral<\/h3>\n<ul>\n<li>Lenders are barred from granting advances against:\n<ul>\n<li>Primary gold\/silver<\/li>\n<li>Financial assets backed by primary gold\/silver (e.g., ETFs, mutual fund units)<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3>Loan-to-Value (LTV) Cap<\/h3>\n<ul>\n<li>For consumption gold loans, the LTV ratio must not exceed 75% of the gold\u2019s value.<\/li>\n<\/ul>\n<h3>Restrictions on Collateral Use<\/h3>\n<ul>\n<li>Gold used as collateral for income-generating loans cannot be used simultaneously for consumption loans.<\/li>\n<\/ul>\n<h3>Ownership Verification<\/h3>\n<ul>\n<li>Lenders must verify and maintain records of the ownership of gold collateral. Loans should not be extended where ownership is doubtful.<\/li>\n<\/ul>\n<h3>Tenor Cap for Bullet Repayment Loans<\/h3>\n<ul>\n<li>Consumption loans requiring bullet repayment (principal and interest due at maturity) are to be limited to a maximum tenor of 12 months.<\/li>\n<\/ul>\n<h3>Operational Norms for Lenders<\/h3>\n<ul>\n<li>Lenders must:\n<ul>\n<li>Integrate gold loan policies with credit and risk frameworks<\/li>\n<li>Set borrower- and sector-specific exposure limits<\/li>\n<li>Ensure loans are linked to repayment capacity via due diligence<\/li>\n<li>Monitor end-use of funds and maintain detailed records<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>The Attractiveness of Gold Loans<\/h2>\n<ul>\n<li><strong>Ease and Accessibility<\/strong>\n<ul>\n<li>Gold loans are attractive due to easy availability, minimal documentation, and quick processing.\u00a0<\/li>\n<li>PSU banks and major financial institutions offer instant loans with flexible repayment options.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Higher Loan Value<\/strong>\n<ul>\n<li>The sharp rise in gold prices has enabled borrowers to secure higher loan amounts against their gold holdings.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Cultural Significance and Emergency Use<\/strong>\n<ul>\n<li>Gold, often passed down through generations, is readily pledged during financial emergencies like medical or educational expenses.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Economic Uncertainty and Stability of Gold<\/strong>\n<ul>\n<li>During economic slowdowns or uncertainty, gold is viewed as a stable asset, encouraging individuals to opt for gold loans.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Digital Expansion<\/strong>\n<ul>\n<li>The rise of digital platforms and fintech solutions has made gold loans more accessible, even in remote areas, boosting their popularity.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>RBI Gold Loan Guidelines FAQs<\/h2>\n<p><strong>Q1.<\/strong> Why did RBI propose new gold loan rules?<\/p>\n<p><strong>Ans.<\/strong> Due to rising gold loan NPAs and irregular lending practices, RBI aims to regulate and safeguard the gold loan market.<\/p>\n<p><strong>Q2.<\/strong> What is the Loan-to-Value (LTV) cap for gold loans?<\/p>\n<p><strong>Ans.<\/strong> RBI\u2019s draft guidelines cap the LTV ratio at 75% of the gold\u2019s value for consumption-related gold loans.<\/p>\n<p><strong>Q3.<\/strong> What are RBI\u2019s concerns with current gold loan practices?<\/p>\n<p><strong>Ans.<\/strong> Concerns include third-party involvement, weak monitoring, non-transparent auctions, and evergreening through repledging without principal repayment.<\/p>\n<p><strong>Q4.<\/strong> What changes were made to stop loan evergreening?<\/p>\n<p><strong>Ans.<\/strong> Since September 2023, repledging gold requires full repayment of principal and interest, curbing indefinite loan extensions.<\/p>\n<p><strong>Q5.<\/strong> Why are gold loans popular in India?<\/p>\n<p><strong>Ans.<\/strong> Gold loans are easily accessible, require minimal paperwork, offer high value due to gold prices, and suit emergency financial needs.<\/p>\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/business\/gold-loans-npas-rbi-norms-moderate-growth-9943096\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a> | <a href=\"https:\/\/www.financialexpress.com\/business\/banking-finance-explainer-will-rbis-move-rein-in-the-gold-loan-rush-3809606\/\" target=\"_blank\" rel=\"nofollow noopener\">FE<\/a> | <a href=\"https:\/\/www.cnbctv18.com\/personal-finance\/rbi-gold-loans-new-rules-draft-paper-lending-size-tenure-collateral-ltv-borrowers-impact-19587142.htm\" target=\"_blank\" rel=\"nofollow noopener\">CNBCTV18<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>RBI issues draft gold loan guidelines to curb NPAs and risky lending practices. New rules include LTV cap, ownership checks, and loan tenor limits.<\/p>\n","protected":false},"author":5,"featured_media":45820,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-45819","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/45819","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=45819"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/45819\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/45820"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=45819"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=45819"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=45819"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}