NBFCs favour ceiling on gold loans for businesses

NON-BANKING FINANCIAL COMPANIES (NBFCs) have approached the Reserve Bank of India (RBI) to consider capping the loan-to-value (LTV) ratio of gold loans being offered to businesses.

- CHRISTINA TITUS & MAHESH NAYAK

From April 1, under the new gold loan guidelines, there will be no regulatory cap on these loans. This implies that NBFCs could advance up to 100% or even more against the pledged gold for loans taken for business purposes.

Big lenders fear that this will lead to over-aggression by some players wanting to capture market share and lead to systemic problems.

According to sources, the Finance Industry Development Council (FIDC), the self-regulatory organisation (SRO) of NBFCs, recently made a representation to the central bank to consider retaining the cap at 75% for gold loans being extended for business purposes or income-generating lending.