Compliance cost may rise for lenders

Banks and non-banking financial companies (NBFCs) may incur higher compliance costs if the Reserve Bank of India's (RBI's) draft guidelines on gold loans are implemented in their current form, said banking officials and experts.

- ANUPREKSHA JAIN

According to the draft guidelines, banks and NBFCs need to adopt standardised documentation across all branches. Moreover, gold financiers have to establish proper collection and calculation methods, preventing any deviation.

"Currently, the cost of collection, documentation, and calculation as far as gold loans are concerned is around 2 per cent. If the guidelines are implemented as they are, the cost will increase to 4-5 per cent," said an executive at a large gold loan NBFC.

He added that branches would have to step up the process of standardisation, which would increase the cost of processing gold loans.