NBFCs to benefit from gold loan norms

THE RESERVE BANK of India's (RBI) draft guidelines to harmonise gold loan regulations across lender categories will help gold loan NBFCs gain a level playing field with banks, which currently benefit from cheaper funds, higher loan-to-value ratios, and lower disclosure requirements, say industry insiders.

- NARAYANAN V

According to the draft, norms for lending against gold must be part of lenders' credit and risk management policies, including single-borrower and sectoral limits for gold loan portfolios. All loans must be linked to the borrower's repayment capacity, supported by proper credit appraisal and due diligence. Lenders are also required to put systems in place to monitor end-use of loans and maintain records.