Gold loans in India have been growing rapidly, increasing by 50% since September 2024, which is faster than the growth of overall loans. As Gold loans are becoming more attractive due to rising gold prices, especially during festivals and weddings, India’s central bank (RBI) plans to take action on gold loans by introducing stricter rules. The RBI wants banks and non-bank financial institutions (NBFCs) to improve background checks on borrowers for gold loans.
Why RBI wants stricter standards for gold loans?
– The RBI has found several irregularities in the gold loan industry, such as problems with how loans are sourced, valued, and appraised.
– Some lenders are not following the standard rules for gold loans, leading to inconsistencies.
– The RBI has also found issues with non-bank lenders and weaknesses in tracking how much money is being lent against gold.
– Sources said some fintech agents of banks have been handling tasks like collecting, storing, and weighing gold, which should be done by the lenders themselves.
– Lenders have been found auctioning gold without notifying borrowers who missed payments.
RBI future outlook for gold loans
The RBI’s stricter rules aim to ensure financial stability, protect borrowers, and improve the integrity of the gold loan industry. The RBI wants to ensure all lenders follow the same rules to prevent any lender from bypassing regulations. This includes better monitoring of gold auctions and ensuring the loaned money is used correctly.
Why customer prefer gold loans?
– Gold loans are a quick way for people to get money by using gold as collateral.
– These loans are easier to get than personal loans, as they don’t require credit checks.
– The RBI allows banks and NBFCs to lend up to 75% of the gold’s market value. For example, if the gold is worth Rs 1 lakh, the loan can be up to Rs 75,000, but it depends on the lender’s assessment.
– Gold loans often have lower interest rates.
– Gold asset evaluation is generally simple, allowing lenders to process loans quickly. As a result, gold loans are an excellent option for people who need money quickly.
Gold loans are growing quickly. In January 2025, the gold loan portfolio grew by 76% compared to the previous year. However, overall retail loan growth has slowed down, especially in unsecured loans like personal loans, vehicle loans, and credit cards.