MUMBAI: The recent regulatory curbs in the gold loan space, requiring lenders to review their policies and processes in a timebound manner, can impact gold loan disbursements and contain the growth of the sector, Crisil Ratings said in a note Tuesday.
Some areas highlighted in the RBI circular pertain to deficiencies in the monitoring of the loan-to-value ratio, asset classification norms for overdue loans, and inadequate due-diligence in monitoring the end-use of gold loans, among others.
The circular came in the backdrop of high growth in the gold loan portfolio of both banks as well as NBFCs over the past few quarters. Retail loans against gold jewellery of banks jumped 37 percent between April and August 2024 even as gold prices rose. For the gold-loan focused NBFCs, growth in assets under management in the first quarter of this fiscal was 11 percent over the previous quarter.
According to Malvika Bhotika, a director with the agency, the new regulations aim to ensure consistent application of guidelines in the gold-loan space and protect borrower interest. Adherence is likely to impact disbursements over the next few quarters and taper gold loan growth both for banks and NBFCs.
That said, NBFCs are expected to adapt to the regulatory measures impacting their business within a reasonable timeframe, just as in the recent past, when limits were placed on cash disbursals, she said.