New Delhi, 19 June (IANS). The new guidelines of the Reserve Bank of India are going to bring major changes in the ‘Gold Loan’ sector. Lenders who will have the ability to change their business models rapidly, they will be able to benefit from these new rules. This information was given in the report of S&P Global Ratings released on Thursday.
The report believes that lenders will have more freedom to lend for a short-term lending for gold-supported consumption loans, allowing small borrower to get more value from their mortgaged gold properties.
Lenders have time till April 1, 2026 to get ready for changes.
The report gives information about two elements of the new rules. The first Lone-to-Value (LTV) ratio involving interest payment until maturity in calculations. This can limit the advance loan amount to be effectively distributed, which the lenders will try to remove. Application of loan evaluation based on the second $ 3,000 consumption-centered loans and cash flow analysis of borrowers for all income-producing loans.
According to the report, Muthoot Finance Limited (BB+/Stable/B) and Manappuram Finance Limited (BB-/Stable/B) will be larger in loan assessment for non-bank financial companies (NBFCs) with major gold-based loans books such as Gold-based loan books.
NBFCs need to develop risk management policies and procedures to evaluate the repayment capabilities of borrowers based on cash flow.
The report states that traditionally, they have been dependent on collateral valuation. To assess the repayment capacity, the skill gaps to appoint and train loan authorities are both an advance cost and obstruction for these lenders.
The report highlights that there is a possibility of quick adjustment in the model. This hopes that the lenders will gradually increase the ratio of three months and six months of maturity products.
The report states that this change will benefit at least medium -income borrowers.
The report believes that the latest rules of the Reserve Bank of India provide clarity on renewing loans.
The rule now makes compulsory that renewal is subject to complete repayment of interest only.
The report is also expected to increase income-producing loans.
According to the report, even though lenders are experimenting with new models, the real difference will be that they will be able to distribute the loan quickly and uninterruptedly.
-IANS
SKT/