Revised gold loan norms to pinch margins, slow growth

LENDERS OFFERING GOLD loans are bracing for margin pressure as tighter underwriting and documentation norms under Reserve Bank of India's (RBI) revised gold loan framework are expected to raise compliance costs.

- KSHIPRA PETKAR & NARAYANAN V

According to industry experts, some lenders could also see a sharp slowdown in growth due to operational adjustments and stricter renewal rules.

Industry players have already begun recalibrating their underwriting, documentation and monitoring practices in line with the revised framework, which took effect from April 1. IIFL Finance, for instance, said it had started aligning its processes ahead of the rollout.

“Our focus has been on strengthening credit assessment and repayment capacity evaluation, alongside tighter documentation and compliance frameworks,” said Manish Mayank, head of gold loan business, IIFL Finance.

While the lender sees the new guidelines as a positive step towards improving transparency and discipline in the sector, it also acknowledges a rise in compliance effort. “In the near term, lenders will need to recalibrate processes, especially around credit assessment, documentation, and monitoring across branch networks. While this adds to compliance effort, it is a necessary step towards building a stronger and more resilient ecosystem,’ Mayank said.