I 'n mid-March this year, the finance ministry asked state-run banks to review their gold loan portfolio for the two-year period between January 1, 2022, and January 31, 2024. This business had grown at a fast clip. Reserve Bank of India (RBI) data has it that it grew 15 per cent to 1 trillion in FY24. Now, in recent times, any kind of exuberance in financial services has seen the authorities swoop down - be it pushing the lines on governance or unsecured credit. The ministry's move came close on the heels of Mint Road barring IIFL Finance from vending gold loans over supervisory concerns. Even as there are whispers that a decade after the KUB Rao Working Group to study 'Issues Related to Gold and Gold Loans NBFCs' submitted its report, a review may well be in order.
Is the surge in the gold loan portfolio of regulated entities merely the result of a surge in the yellow metal's price? Or, is it that that many customers, unable to avail of finance from formal sources, are overleveraging? It's a combination of both.
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