RBI to Tighten Grip on Gold Loans


I. Unnikrishnan, Managing Director of Manappuram Finance, says, “The incremental flow of funds to gold-lending NBFCs will be impacted. However, the impact would be minimal as we have a fair spread of sources of funds. Currently, our credit lines with banks are at 8,000 crore.”

Oommen K. Mammen, Chief Financial Officer of Muthoot Finance, says that the RBI should have researched gold loans before going forth with this step. Mammen quotes that this step of RBI “may hinder new entrants with small-size portfolios from raising funds from banks.” He further adds, “However, it is possible that tomorrow, the RBI may well change their view and roll back these restrictions.” He says that Muthoot Finance’s bank funds boil down to nearly 10,000 crore.

Banks can, however, exceed the said limit of RBI by 5 percent only if the NBFCs lend for infrastructure related projects. RBI has also formed a committee comprising K.U.B. Rao, to research gold loan firms and probable links to lending practices and gold prices. This panel will submit its report by end of July.