Banks and non-banking companies are distributing gold loans openly. The Reserve Bank is worried about his ‘generosity’. Gold loan approvals in Q1FY25 alone witnessed a record jump of 26% year-on-year and 32% compared to the March quarter, with the total value of sanctioned loans amounting to Rs 79,217 crore.
The record rise in gold loans sanctioned by banks and non-banking finance companies is being considered as the trigger for the RBI to step in and ask lenders to fix the gap in the accounting of these loans so that their Bad loans in accounts did not increase.
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Continuous increase for several quarters
This increase in gold loans has not happened all at once. Rather, it has been happening continuously for many quarters. During April-June 2023, the growth was 10%. This growth is despite stiff competition from banks in the sector. Gold loans rose nearly 41% on a year-on-year basis to Rs 1.4 lakh crore, according to RBI zonal data on bank loans for August 2024.
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Playing through top-up and roll-over
This was followed by a review which revealed the practice of concealing bad loans as well as making loans evergreen through top-ups and roll-overs without any proper appraisal. While it is easy to get a gold loan, they Borrowing is considered by many as a last resort for those who are unable to access other sources of funding. The growth in gold loans is more than double the growth of the entire NBFC industry. It saw loan growth of 12% year-on-year.
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Loan for new and second hand cars
In other segments, loans for new and second hand cars have increased at high rates. The next largest segment in terms of approvals is personal loans, which accounts for 14% of NBFC lending. Next is home loan, which is 10% of industry loan. Property loans and unsecured business loans are slightly higher at 8%.
