&w=3840&q=100)
Draft gold loan guidelines may slow down NBFCs' loan growth, says Crisil
The draft guidelines on gold loans released by the Reserve Bank of India (RBI) are likely to slow down loan growth for non-banking financial companies (NBFCs) focused on gold lending, said Crisil Ratings in a report.
The draft guidelines propose that the loan-to-value (LTV) ratio be maintained within a ceiling of 75 per cent throughout the loan tenure, including both principal and accrued interest. According to the rating agency, enforcing a 75 per cent LTV ceiling would reduce disbursements for gold loans to 55–60 per cent from the current 65–68 per cent, particularly for bullet repayment loans. In the case of equated monthly instalment (EMI)-based loans, a higher LTV can be offered, but such loans typically lead to a rundown of the loan book. Both scenarios are likely to affect loan growth for NBFCs, said the agency.
'If implemented in the current form, the directions on LTV computation and breaches thereof can impact the growth prospects of gold loan NBFCs, as they will have to recalibrate their disbursement values. For bullet loans, we expect the LTV at disbursement to reduce from 65–68 per cent currently to 55–60 per cent, to factor in accrued interest and ensure LTV compliance. This will mean lower loan disbursement for the same value of gold jewellery. NBFCs may also look at periodic interest collection from customers to manage LTVs. Alternatively, they may decide to focus on EMI-based products,' said Malvika Bhotika, Director, Crisil Ratings.
Moreover, if the LTV is breached continuously for 30 days, the lender will be required to make an additional 1 per cent standard asset provisioning, according to the draft.
Additionally, renewals or top-ups of bullet repayment loans can only be extended after full repayment of accrued interest. This will reduce borrower flexibility and limit the ability of NBFCs to renew or top up loans seamlessly. According to the rating agency, this could create practical challenges for borrowers and impede loan renewal processes.
With respect to disbursements and collections through banking channels, any cash disbursement or receipt must comply with the statutory provisions of the Income Tax Act, 1961, and related rules.
The introduction of the term 'receipt' in the context of income tax compliance may pose challenges for cash collections exceeding ₹20,000, the agency said.
Until May 2024, NBFCs were offering gold loans of less than ₹2 lakh in cash and were also collecting repayments and instalments in cash.
'As lenders re-orient their processes to comply with the revised regulations, expect some hiccups—similar to those seen in the past when implementing comparable guidelines. That said, the directions are expected to structurally strengthen the sector over time. Further, ultimate losses are also likely to remain in line with past trends due to strong risk management practices and timely auctions,' said Crisil.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Indian Express
an hour ago
- New Indian Express
How to maximise your income tax refunds
The income tax return filing season has started. Filing return is a mandatory requirement for all taxpayers except those whose income does not exceed the basic exemption limit of Rs 2.5 lakh per annum under the old tax regime and Rs 3 lakh under the new tax regime. ITR not only helps the tax department calculate the real tax liability of a person, it also helps taxpayers to get a refund of taxes paid in excess of their liabilities. There could be several reasons for a taxpayer to get a refund. When the advance tax paid under self-assessment exceeds the actual tax liability; tax deducted at source (TDS) on income such as salary, interest on securities or debentures, dividends, or other sources is higher than the tax payable; or same income is taxed twice in India and a country with which India has a tax treaty. Also, there could be situations when a correction in the assessment process leads to reduction in tax liability or you may not have reported earlier eligible investments or expenses that qualify for tax deductions. So, while filing returns, you must take the following steps to maximise your refunds. File on time: First, always file your return on time. Delaying it not only brings penalties but can also affect your ability to claim certain benefits or carry forward losses. Claim all eligible deductions: Nehal Mota, Co-Founder & CEO, Finnovate, says, "making sure you are claiming all the deductions you're eligible for under the Income Tax Act—things like investments under 80C, health insurance under 80D, NPS under 80CCD(1B), and donations under 80G. These can significantly reduce your taxable income." Rakshith H D, CFP and Head Digital Sales, GoalTeller, advises, if you receive HRA or other allowances like travel and medical, claim them with proper proofs. Choose the right tax regime: Choosing the right tax regime is equally important. New tax regime does not allow deductions on investments and certain expenses. Charu Pahuja, CFP CM, Group Director and COO, Wise Finserv, says one of the first and most important decisions is to choose between the old and new tax regime—an option that can directly affect your home income. Reconcile your tax credits: Don't forget to check your Form 26AS before filing ITR. This is where you can see the tax that's already been deducted from your income—whether by your employer, bank, or clients. If they've deducted more than necessary, you can claim it back as a refund, but only if you've reported everything correctly. Rakshith H D says don't forget to include all TDS and advance tax paid by employers, banks, or other institutions to ensure accurate refund claims. Gather all necessary documents and report all income: Before filing your income tax return, ensure you have all necessary documents like Form 16, interest certificates, Form 26AS, AIS, and investment details to avoid missing any refund opportunities. "Report all sources of income, including bank interest or freelance earnings, to avoid future complications," says Rakshith H D of GoalTeller Offset losses: If you have incurred losses in stocks or property, set them off against your income to lower tax liability. Ensure accurate filing: Filing your return early and e-verifying it through Aadhaar OTP or net banking ensures faster processing of refunds. Finally, double-check all details, including PAN, bank account number, and deductions, before submission to ensure smooth and timely refunds. Rakshith H D says, "In case the Income Tax Department requests additional information, respond promptly to avoid delays."
Time of India
an hour ago
- Time of India
Fuelling Growth: PSU banks told to boost credit to crucial sectors
The government is encouraging state-run banks to increase lending to productive sectors, particularly MSMEs, through targeted Mudra financing and identification of high-employment clusters. Loan melas are planned for retail customers, following the RBI's recent rate cut to boost private sector investment. The government is also finalizing the Grameen Credit Score to improve credit access for SHGs and the rural population. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads New Delhi: The government has nudged state-run banks to push credit in productive areas of the economy, including micro and small enterprises As part of various initiatives planned, banks will identify 50 high-employment clusters of MSMEs and push lending through sector-specific Mudra financing products. For retail customers, loan melas at bank branches are also being planned, said people familiar with the this month, the Reserve Bank of India (RBI) announced a 50 basis points rate cut, bringing the repo rate down to 5.50%. The repo rate is the interest rate at which the RBI loans money to commercial RBI has pegged the growth for 2025-26 at 6.5%, and with loans becoming cheaper after the rate cut, it is expected to fuel more private sector capital expenditure."We want banks to proactively support our MSMEs and self-help groups (SHGs) and align with the various other schemes announced in the budget," said an official requesting anonymity. Finance minister Nirmala Sitharaman is also expected to hold a performance review meeting of public sector banks (PSBs) later this month where the issue of pushing credit to important sectors of the economy without compromising on due diligence or underwriting standards will be discussed, said the above quoted this year, the government had approved the Mutual Credit Guarantee Scheme for MSMEs, guaranteeing loans up to ₹100 in the FY24 budget, the scheme is expected to facilitate the availability of credit for the purchase of plant, equipment and machinery by MSMEs and give a major boost to manufacturing."We are also finalising the modalities and contours of the Grameen Credit Score (GCS) in consultation with the stakeholders, and this will ensure more credit access to retail customers," the official said. Announced in the FY25 budget, GCS is tailored for the credit assessment purposes of SHG borrowers and the rural population, and will lead to access to formal credit for the rural population, including farmers and marginalised to a report by CareEdge Ratings, credit outstanding for scheduled commercial banks touched ₹182.5 lakh crore as of March 31, 2025, registering a growth of 11.1% y-o-y compared to 19.3% (including merger impact) in Q4 FY24. "As of March 2025, PSBs have gained market share in total credit, accounting for 53.8%, compared to 41.2% held by PVBs (private sector banks)," it said, noting that private banks have focused on managing their elevated credit-deposit or CD ratio.
&w=3840&q=100)
Business Standard
4 hours ago
- Business Standard
Microfinance industry refashions itself amid opportunities and challenges
Central bank has taken a sympathetic view of institutions by easing some lending norms premium Raghu Mohan Listen to This Article 'The microfinance sector continues to suffer from a vicious cycle of over-indebtedness, high interest rates and harsh recovery practices,' said M Rajeshwar Rao, deputy governor at the Reserve Bank of India (RBI), last week. These are tough words from the otherwise soft-spoken Rao, the senior-most in that position at the central bank. He also pointed out the prevalence of Shylock-like tendencies: 'Lenders should look beyond the conventional 'high-yielding business' tag…and approach it with an empathic and developmental perspective, recognising the socioeconomic role that microfinance plays in empowering vulnerable communities.'
