RBI move to slow down gold loan growth, lead to uptick in delinquencies: Crisil
gold loan disbursements during the transition phase and curb growth in the business," the note by Crisil said.
It can be noted that a few weeks ago, RBI had flagged certain irregular practices in loan against gold jewellery and asked lenders to comprehensively review their policies, processes and practices to identify gaps and initiate remedial measures in a time-bound manner.
The notification had flagged deficiencies in the monitoring of the loan-to-value (LTV) ratio, asset classification norms for overdue loan accounts, and inadequate due-diligence in monitoring the end-use of gold loans.
Reported loan delinquencies may see some uptick as entities revisit their current non-performing asset (NPA) recognition norms and/or policies and procedures for disbursing loans to existing customers, the agency said.
However, it was quick to add that in the gold loan business, credit cost is the more appropriate indicator of asset quality and overall credit losses are seen under control because of Indians' emotional attachment to the precious metal.
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