The Reserve Bank of India (RBI) has reported a sharp surge in gold loans across the country, reflecting an increasing dependence on gold as collateral to meet financial needs. According to the RBI’s report, gold loans saw significant growth in the period ending September 2024 compared to the same period a year earlier.
“Gold loans have clocked rapid growth in the period ending September 2024 as compared to a year ago,” the RBI said, underscoring the growing popularity of this financial instrument.
However, the central bank also raised concerns over irregular practices observed among certain supervised entities (SEs) involved in gold lending. To address these issues, the RBI issued comprehensive guidelines on September 30, 2024, directing SEs to review their policies, processes, and practices.
The report identified several gaps, including deficiencies in outsourcing practices, discrepancies in gold valuation, inadequate due diligence, and insufficient monitoring of the end use of loan funds. These measures aim to ensure that the rapid growth in gold loan portfolios remains sustainable and free from malpractice.
Non-Banking Financial Companies (NBFCs) continue to dominate the gold loan segment, holding a substantial 59.9% share of total gold loans disbursed by both banks and NBFCs as of March 2024. This underscores their critical role in catering to borrowers who rely on gold jewelry and ornaments for securing loans.
“NBFCs maintained their dominance in loans against the pledge of gold ornaments and jewelry, with a share of 59.9% of total gold loans (banks and NBFCs together) at end-March 2024,” the RBI highlighted in its report.
In contrast, the report noted a slowdown in credit growth in other retail lending categories. Growth in unsecured personal loans has slowed significantly since September 2023, while microfinance and self-help group (SHG) loans saw their growth rates drop by over two-thirds in the past year.
(Inputs from ANI)
