RBI's Gold Loan Guidelines Pose New Challenges for Non-Bank Financiers

A Crisil report outlines how implementing RBI's draft guidelines on gold loans may slow asset growth among non-bank financiers. The draft seeks to harmonize regulatory frameworks, affecting loan-to-value ratios and the renewal of bullet loans, potentially impacting the profitability of non-banking financial companies.

The implementation of the RBI's draft guidelines on gold loans is projected to decelerate asset growth among non-bank financiers, according to a Crisil report released Tuesday. The guidelines focus on loan-to-value ratios and the renewal of bullet loans, crucial factors that could influence NBFCs' loan growth.

Issued in April, the draft aims to harmonize regulatory frameworks and address disparities in lending practices. This follows a September 2024 directive from the RBI to scrutinize irregular practices amid rising loan-against-gold portfolios, urging lenders to identify and remedy gaps within a set time frame.

Crisil noted that while immediate profitability impacts from the changes may be manageable, the recalibration of disbursement values and periodic interest collection could be necessary. These adjustments are expected to strengthen the sector structurally over the long term, despite near-term challenges for NBFCs.

(With inputs from agencies.)