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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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.