Gold Loan Companies Protest to RBI
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Transcript of Gold Loan Companies Protest to RBI
Gold loan companies protest to RBI
Urge level playing field with banks, cite Rao panel report in their support; warn of loss of
business to lenders in unorganised sector
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Fearing a rapid loss in business to banks, gold loan companies have urged the Reserve Bank of
India (RBI) to provide a level playing field.
In a recent meeting with RBI officials, gold loan companies emphasised that the latest move by
the banking sector regulator favours banks lending against gold jewellery at the cost of private
sector players in this business.
RBI’s move is set to cap branch expansion of gold loan companies and prove an obstacle in
bringing out the idle gold in the country, they argued.
“Gold loan non-banking finance companies (NBFCs) are doing a socially useful function and
that provides a strong rationale for careful regulation of the activities” is what the K U B Rao
committee’s recent final report said on the subject. The report had a detailed analysis with the
final recommendations, which not only clarified the negative air against gold loan NBFCs but
cleared a roadmap on how to shape the sector for long-term growth.
“RBI’s latest move partially contrasts with the Rao committee’s recommendations. While the
committee suggested growth measures for gold loan NBFCs, RBI has for the last 18 months
taken several hard measures to cap their growth. In addition to lower LTV (loan to value),
stringent norms of KYC (know your customer) and on cheque payment over Rs 100,000 restrict
the growth of gold loan companies,” said Arun Kejriwal, founder of Kejriwal Research and
Investment Services. Rao had recommended cheque payment only of amounts above Rs
500,000.
A person wanting a gold loan is in very urgent need of funds. Paying him by cheque would
extend his waiting period by two more days before the actual monetising of gold. He or she
would prefer to go to moneylenders or pawn brokers, who would address his need upfront. And,
some banks in the south do not insist on an account for customers. All this would dampen
matters for gold loan companies.
This comes even as the central bank has been vocal about financial inclusion and bringing about
inclusive growth. One of its key criteria in issuing the new banking licenses is that the entity
should have strong presence in the rural hinterland.
RBI has continued its cap on LTV to 60 per cent for gold loan NBFCs, despite the Rao
committee recommending its extension to 75 per cent. For banks, the LTV continues at 75 per
cent and sometimes goes to 80 per cent. The loss in business for NBFCs could go to the
unorganised market of pawn brokers and moneylenders, on which the government or RBI does
not have control.
Extending favourable room to gold loan companies would help continue expanding the organised
gold loan market, plus helping the government in monetising the country’s idle gold holdings.
RBI has asked banks to help monetise idle gold by raising their gold loan portfolio but continues
to restrict gold loan NBFCs from expanding their presence, say critics.
C
Gold Loan
The Muthoot Gold loan portfolio is the largest in India as well as all around the globe. It is
humbling to know that more than 80,000 people avail our trusted services on a daily basis.
For the past 126 years, the company has been serving the interests of customers as its top most
priority. Our journey through centuries coupled with the fact that we are still a rapidly growing
company highlights the trust and commitment that our customers worldwide have shown in us.
With Muthoot Finance Ltd. gold loan services, it takes no more than a few minutes for your gold
to generate cash. The simple procedure that we follow allows:
Quick Loan disbursal
Loan limit stretches from Rs. 1500 to Rs. 1 crore
Pre-payment option-without any penalty
Minimal documentation
In-house gold evaluation
Improves customer service in a shorter response time
Strong rooms for providing safe custody for gold ornaments
Being India’s largest gold loan service provider, safeguarding the deposits of gold ornaments is
our primary concern. A flexible interest rate policy is what helps us cope with volatile markets.
Our gold loan range starts from Rs. 1,500 and stretches up to Rs. 1 Crore. Serving over 80,000
customers daily, we assist almost every section of the society in obtaining quick cash for
leveraging their dreams.
Please Note: For loans outstanding for more than 12 months, a penal interest @ 2%p.a. will also
be charged with effect from 02.05.2013.
Gold Loan Schemes
Scheme Slab Period/s Rate of Interest
Best value
Loan(MBL)
upto 1 / above 1 upto 3 / above 3 upto 6
/ above 6 upto 12 / above 12 months
12% / 16% / 20% / 24% / 26% (including
penal interest of 2% w.e.f 02.05.2013)
TrueValue Loan 3 / 6 / 12 months 15% / 18% / 21% p.a.
TrueValue Loan 3 / 6 / 12 months 15% / 18% / 21% p.a.
Xpress Loan 3 / 6 / 12 months 20% / 21% / 24% p.a.
Super Loan 3 / 6 / 12 months 22% / 23% / 24% p.a.
Gold Loan
Installment Scheme 6 / 9 / 12 months 14% / 14.5% / 15% p.a.
Gold Loan
Installment Scheme 18 / 21 / 24 / 15 months * 16.75% * / 17% / 17.25% / 17.5% p.a.
Gold Loan Overdraft n/a 20% p.a.
*Conditions apply
FAQs
What is a Gold Loan?
A gold loan is a loan which is secured against gold ornaments. A borrower pledges their gold
ornaments with the lender in exchange for funds. Therefore, it is a loan which is granted against
a certain physical security of gold. Gold loans have successfully enabled thousands of people to
mobilize their personal assets, which would've otherwise simply been kept away in a locker.
What is a Gold Loan?
A gold loan is a loan which is secured against gold ornaments. A borrower pledges their gold
ornaments with the lender in exchange for funds. Therefore, it is a loan which is granted against
a certain physical security of gold. Gold loans have successfully enabled thousands of people to
mobilize their personal assets, which would've otherwise simply been kept away in a locker.
What are the benefits of talking a Gold Loan from Muthoot Finance Ltd.?
Customer oriented Services
Quick Loan disbursal
Loan limit stretches from Rs. 1500 to Rs. 1 crore (and above)
Pre-payment option-without any penalty
Minimal documentation
In-house gold evaluation
Improves customer service in a shorter response time
Strong rooms for providing safe custody for gold ornaments
Who is eligible to avail a Gold Loan?
Anyone, above the age of 18, can avail a loan against gold. All they need to provide are the gold
ornaments and the required documents.
What type of security do I need to provide? Do I need a guarantor?
The only security which is required from the customer in order for them to avail a gold loan from
Muthoot Finance Ltd. is the very gold they pledge with Muthoot Finance Ltd. itself. There is no
need for an external/third party guarantor for the same. The loan will be sanctioned against the
gold pledged.
What is the minimum/maximum tenure of the gold loan?
The minimum tenure for our gold loan is 1 day and maximum tenure for our gold loan is 15
months, each loan has a different tenure (please refer to table below).
What type of gold can I pledge to avail the gold loan?
You can pledge any type of gold jewellery/gold ornaments with us. This includes items such as
necklaces, rings, bracelets, watches, 'Polki' sets, pendants, 'Kardahs', etc.
w can I repay my loan? What different options are available for the
repayment?
Our gold loans can be repaid in a flexible manner. You must repay the loan at any of our
branches by cash or cheque. (credit/debit cards and demand drafts are not accepted).
How do I repay my loan and can partial payment be made for the gold loan?
The loan can be repaid at any Muthoot Finance Branch, irrespective of the location. Muthoot
Finance's CBS system is implemented in all branches and allows the customers to repay their
loans from any branch. However, final collection of the pledged gold will have to be from the
initial branch where it was pledged.Yes one can make partial payment along with the interest for
the previous period. For eg. If one has a gold loan of a lakh rupees for a period of 3 months.
He/she may come on 20th day from the start of the loan and pay 20 days interest and an
additional Rs.10000.00 (part payment), then this additional amount will be fully adjusted from
the principal amount and from 21st day the interest will be charged on Rs.90000.00
How and when can I get back the pledged gold jewellery/ornaments?
The gold which you pledge with us will be given back to you after the loan and the complete
amount has been repaid. Failure to repay the loan will result in Muthoot Finance Ltd. reluctantly
auctioning off the same. The borrower will be given multiple intimations towards the same for a
period of 18 months after the final date of repayment before it is auctioned. As mentioned earlier,
the pledged gold has to be collected from the branch where it was initially pledged and stored.
SBI sees no stress in gold loan portfolioLast Updated: Tuesday, April 16, 2013, 19:40
0 0 inShare38 Tags: Gold, Gold prices today, gold loan, SBI, State Bank of India
Mumbai: State Bank of India
Tuesday said it does not see any stress on its Rs 35,000
crore gold loan portfolio because of the plummeting
prices of the precious metal, but said it will revise its
loan-to-value (LTV) ratio from the present 70 percent.
"Generally we keep a 30 percent limit (of value). Yes,
we will have to review that. That (LTV) will be
adjusted... We would be revising our advisory for gold
loans with the valuations (dropping)," SBI Chairman
Pratip Chaudhuri told reporters here.
The Chairman of the country's largest lender said the
bank's LTV ratio is based on the prices of the peak
value.
"Gold prices have dropped, but still they are above 70
percent of the peak value," he said.
He added that the bank does not lend against gold in
the conventional manner and that its portfolio of Rs
35,000 crore comprises agricultural advances to
farmers wherein pledging of gold as a security
increases the value of the advances he or she gets.
"As of now there is no immediate impact of the drop in
prices. Generally our gold is only moral suasion, very
seldom we forcibly take away the gold and realise the
gold. To that extent, we are not so much dependent on
the value of the gold," he said.
It should be noted that sector regulator Reserve Bank
of India has for long been expressing concerns over a
potential stress because of the rise in gold loans. It also
decreased the LTVs for non-banking lenders to 60
percent because of concentration risks in April 2012.
However, the strongly regulated banks are outside this
limit.
The comments from SBI chief come amidst a steep fall
in the value of gold Tuesday, which has hit a 21-month
low of Rs 1,160 to Rs 26,440 tracking weak global
cues. Today's fall is the third consecutive decline.
The yellow metal had hit a 15-month low to Rs 27,600
per 10 grams on Monday due to persistent selling by
stockists, triggered by a heavy sell-off in global
markets.
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Shares of gold loan companies, jewellery makers
fall up to 12%
Gold stages mild recovery after hitting 19-month
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Gold price hits 21-month low; falls by Rs 1,160 to
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parameters: Montek
This also had a drastic fallout on the stocks of gold
loan companies and jewellery retailers stocks of gold
loan companies, which fell over 13 percent.
The market reaction came after Reserve Bank has
reportedly sought LTV details from pure-play gold
loan companies over the past week, since prices started
falling.
Marketmen said sustained weakness in overseas
markets, where gold plunged over 9 percent yesterday
to its lowest level since February 2011, on worries over
Chinese growth and possible sell-off by struggling
Cyprus's central bank, continued to influence the
trading sentiment here.
In New York, gold plunged 9.35 percent to USD
1,360.60 an ounce. The metal has dropped by USD 200
an ounce, or nearly 13 percent, in the last two trading
days.
Gold LoanThe Muthoot Gold loan portfolio is the largest in India as well as all around the globe. It is humbling to know that more than 80,000 people avail our trusted services on a daily basis.
For the past 126 years, the company has been serving the interests of customers as its top most priority. Our journey through centuries coupled with the fact that we are still a rapidly growing company highlights the trust and commitment that our customers worldwide have shown in us.
With Muthoot Finance Ltd. gold loan services, it takes no more than a few minutes for your gold to generate cash. The simple procedure that we follow allows:
Quick Loan disbursal Loan limit stretches from Rs. 1500 to Rs. 1 crore Pre-payment option-without any penalty Minimal documentation In-house gold evaluation Improves customer service in a shorter response time Strong rooms for providing safe custody for gold ornaments
Being India’s largest gold loan service provider, safeguarding the deposits of gold ornaments is our primary concern. A flexible interest rate policy is what helps us cope with volatile markets. Our gold loan range starts from Rs. 1,500 and stretches up to Rs. 1 Crore. Serving over 80,000 customers daily, we assist almost every section of the society in obtaining quick cash for leveraging their dreams.