Latest news with #NirmalaSitharaman
Indian Express
3 hours ago
- Business
- Indian Express
What are RBI's new draft rules for gold loans, why govt wants small borrowers exempt
After the Reserve Bank of India (RBI) released draft guidelines for gold loans last month, the Finance Ministry has suggested that loans below Rs 2 lakh be exempt from the tighter rules, and the norms come into effect only from January 1, 2026, to ensure proper implementation. This came after Tamil Nadu Chief Minister MK Stalin wrote to Finance Minister Nirmala Sitharaman, claiming that the new rules would hinder poor and middle class homes' access to institutional credit. To address urgent need for money, loans against gold remain a popular choice across India. The RBI has told banks that loans can only be offered against gold jewellery and bank-issued coins, and not against gold bars, ingots, bullion, etc. What other changes has the RBI proposed, and why? We explain. The RBI is changing gold loan rules because lots of people are borrowing against gold as the value of the precious metal shoots up. With the number of gold loans going up, NPAs — non-performing assets; when a loan can't be repaid, it becomes an NPA — are going up too. In absence of proper guidelines, such a scenario can hurt both lenders and borrowers. The Indian Express has earlier reported that gold loan NPAs of Rs 2,040 crore were reported by commercial banks as of December 2024, up from Rs 1,404 crore a year ago. Finance companies involved in gold loans accumulated NPAs worth Rs 4,784 crore as against Rs 3,904 crore last year, the RBI said in its reply to an RTI application filed by The Indian Express. On the surface, gold loans seem fairly straightforward: in case of default, the lender can auction off the gold and recover the money. However, things aren't that simple. While the loan money may have helped the borrower meet her immediate need, failure to repay shows continued financial strain. If the jewellery is auctioned off, the borrower loses an asset, apart from damaging her credit ratings. Also, in Indian households, gold often has a high emotional value attached, so the loss is more than financial. For lenders, if the gold was not valued properly; or the loan amount was too high with respect to the value of the gold (something called loan to value or LTV ratio); or if gold prices crash, the full value may not be recovered. Also, if too many gold loans default, the lender could face a liquidity problem, as the auctions are a lengthy process. The RBI's draft guidelines seek to address all these concerns. Here are the key changes the RBI has laid out in the draft guidelines. LTV ratio: The RBI has said that the 'maximum LTV ratio in respect of consumption gold loans shall not exceed 75 per cent of the value of gold'. LTV ratio is calculated by dividing the loan amount by the value of the gold jewellery or coin. Assessing the value of the gold: The RBI has said that lenders have to put in place a standardised procedure to assay the purity of gold collateral, and only qualified assayers with no negative record can perform this function. The borrower must be present during the assaying of the collateral. 'Gold accepted as collateral shall be valued based on the price of 22 carat gold. If the gold collateral is of purity less than 22 carats, the lender shall translate the collateral into the equivalent of 22 carat purity, and accordingly value the collateral. In other words, collateral of lower purity of gold shall be valued proportionately. For this purpose, the lower of (a) the average closing price of 22 carat gold for the preceding 30 days, or (b) the closing price of 22 carat gold on the preceding day, either as quoted by the India Bullion and Jewellers Association Ltd. or the historical spot gold price data publicly disseminated by a commodity exchange regulated by the Securities and Exchange Board of India (SEBI) shall be considered,' the RBI release says. Silver accepted as collateral will be valued at 999 purity silver prices. Proof of ownership: Loans can't be extended against jewellery whose ownership is doubtful. If the original bill of sale is not available, the borrower will have to submit a declaration explaining the ownership of the jewellery or coin. Purpose of the loan: Rules are slightly different for consumption loans (loan to satisfy an immediate consumption need, such as medical bills, buying something) and income generating loans (where the loan money will be used for some sort of moneymaking activity, including farm loans). In case of income generating loans, the lender has to monitor what the money is being used for. This requirement kicks in for consumption loans above a threshold amount decided by the lender. If a consumption loan is a 'bullet loan' (where both the principal amount and the interest are due at the date of maturity) will be capped at 12 months. Also, the RBI says, 'Income generating loan shall primarily be categorised as per the purposes for which they are extended and shall not generally be categorised as gold loans. The quantum and tenor of income generating loan shall be assessed on the basis of credit requirement and cash flows likely to be generated through the economic activity and not on the basis of value of the collateral.' Importantly, the same eligible gold collateral 'shall not be used concurrently for extending loans for income generating purposes as well as consumption loans, notwithstanding the value of the collateral.' The aggregate weight of either gold or silver ornaments pledged for loan shall not exceed 1 kilogram per borrower, the RBI says. In case of coins, the aggregate weight is capped at 50 grams per borrower for gold coins, and 500 grams per borrower for silver coins. If lenders extended loans on huge quantities of gold, too much of their money would be tied to one asset, and the risk of money-laundering would go up too. The RBI has also said that lenders can't extend loans against re-pledged gold collateral. The same piece of gold can be used to avail a loan again only when all dues of the previous loan, including interest, arrears, and principal, have been paid off. Yashee is an Assistant Editor with the where she is a member of the Explained team. She is a journalist with over 10 years of experience, starting her career with the Mumbai edition of Hindustan Times. She has also worked with India Today, where she wrote opinion and analysis pieces for DailyO. Her articles break down complex issues for readers with context and insight. Yashee has a Bachelor's Degree in English Literature from Presidency College, Kolkata, and a postgraduate diploma in journalism from Asian College of Journalism, Chennai, one of the premier media institutes in the countr ... Read More
Time of India
8 hours ago
- Business
- Time of India
CBIC Clarifies Misconceptions About GST Registration Delays, Legal News, ET LegalWorld
The CBIC on Saturday debunked a claim circulating on social media about delays and corruption in granting GST registration, saying the applicant has yet to furnish details sought by Delhi state GST officers. One individual took to LinkedIn to talk about how he has not been granted GST registration even after applying 20 days back. The post was shared on X by another user accusing that there is "corruption" in granting Goods and Services Tax (GST) registration. Replying on X, the Central Board of Indirect Taxes and Customs (CBIC) gave facts of the case and said the application was filed this week on May 26, 2025, which was assigned to Delhi State GST. Advt The Central GST authorities had no role in this matter, the CBIC further said that as per Delhi State GST authorities, the case was processed immediately and a query was raised about the missing designation of the person who has signed the rent agreement on behalf of the company."At this stage, the ARN was pending for reply from the taxpayer side and it was duly informed to the taxpayer. The application will be processed by the Delhi GST authorities upon receipt of the pending information," the CBIC indirect tax authority also asked people to refrain from circulating "wrong information on social media without knowing the facts".Finance Minister Nirmala Sitharaman also took to X and quoted the CBIC post."A detailed response from @cbic_india. To provide service to the taxpayer is our duty. While so serving the taxpayers, transparency and integrity are crucial in earning their trust and confidence. Confident that the Board and the field formations will remain sensitive and responsive," the minister said. Join the community of 2M+ industry professionals Subscribe to our newsletter to get latest insights & analysis. Download ETLegalWorld App Get Realtime updates Save your favourite articles Scan to download App
India.com
11 hours ago
- Business
- India.com
Govt Prioritising Lower Denomination Notes And Digital Transactions: Sitharaman
New Delhi: Union Finance Minister Nirmala Sitharaman said on Saturday that the priority of the government is to "make sure" that currency in circulation will be in "lower denominations" and spreading more awareness for "doing digital transfers." Answering a question on the future of Rs 500 currency, Sitharaman said, "We are making every effort to make sure that currency will be in the lower denominations, used much more than the higher, as the Rs 2000 is almost completely out of circulation, except for possibly 0.02, which is still lying outside. Others have given it to the banks." "We need to have more digital awareness built so that people see a benefit in doing digital transfers," the Union Finance Minister said at the 'National Commemorative Seminar on 60 Years of Pt Deendayal Upadhyaya Integral Humanism Lectures' in the national capital. In recent years, India has witnessed an unparalleled rise in digital transactions, marking a significant milestone in its journey towards becoming a cashless society. At the forefront of India's digital payment revolution is UPI with a record hit of 16.73 billion transactions in December 2024. In addition to this, Immediate Payment Service (IMPS) and FASTag have emerged as pivotal players, making financial transactions faster, more accessible, and secure. As of recent data from the National Payments Corporation of India (NPCI), UPI has set a new record by processing over 16.73 billion transactions, with a staggering transaction value of Rs 23.25 lakh crore. This is a notable jump from Rs 21.55 lakh crore in November. In 2024, UPI processed around 172 billion transactions, marking a 46 per cent increase from 117.64 billion in 2023. This rise underscores a broader cultural shift toward financial inclusivity, with UPI being a central pillar.
Times of Oman
11 hours ago
- Business
- Times of Oman
Govt prioritising lower denomination notes and digital transactions: Sitharaman
New Delhi: Indian Union Finance Minister Nirmala Sitharaman said on Saturday that the priority of the government is to "make sure" that currency in circulation will be in "lower denominations" and spreading more awareness for "doing digital transfers." Answering a question on the future of Rs 500 currency, Sitharaman said, "We are making every effort to make sure that currency will be in the lower denominations, used much more than the higher, as the Rs 2000 is almost completely out of circulation, except for possibly 0.02, which is still lying outside. Others have given it to the banks." "We need to have more digital awareness built so that people see a benefit in doing digital transfers," the Union Finance Minister said at the 'National Commemorative Seminar on 60 Years of Pt Deendayal Upadhyaya Integral Humanism Lectures' in the national capital. In recent years, India has witnessed an unparalleled rise in digital transactions, marking a significant milestone in its journey towards becoming a cashless society. At the forefront of India's digital payment revolution is UPI with a record hit of 16.73 billion transactions in December 2024. In addition to this, Immediate Payment Service (IMPS) and FASTag have emerged as pivotal players, making financial transactions faster, more accessible, and secure. As of recent data from the National Payments Corporation of India (NPCI), UPI has set a new record by processing over 16.73 billion transactions, with a staggering transaction value of Rs 23.25 lakh crore. This is a notable jump from Rs 21.55 lakh crore in November. In 2024, UPI processed around 172 billion transactions, marking a 46 per cent increase from 117.64 billion in 2023. This rise underscores a broader cultural shift toward financial inclusivity, with UPI being a central pillar.
India Gazette
21 hours ago
- Business
- India Gazette
Govt prioritising lower denomination notes and digital transactions: Sitharaman
New Delhi [India], May 31 (ANI): Union Finance Minister Nirmala Sitharaman said on Saturday that the priority of the government is to 'make sure' that currency in circulation will be in 'lower denominations' and spreading more awareness for 'doing digital transfers.' Answering a question on the future of Rs 500 currency, Sitharaman said, 'We are making every effort to make sure that currency will be in the lower denominations, used much more than the higher, as the Rs 2000 is almost completely out of circulation, except for possibly 0.02, which is still lying outside. Others have given it to the banks.' 'We need to have more digital awareness built so that people see a benefit in doing digital transfers,' the Union Finance Minister said at the 'National Commemorative Seminar on 60 Years of Pt Deendayal Upadhyaya Integral Humanism Lectures' in the national capital. In recent years, India has witnessed an unparalleled rise in digital transactions, marking a significant milestone in its journey towards becoming a cashless society. At the forefront of India's digital payment revolution is UPI with a record hit of 16.73 billion transactions in December 2024. In addition to this, Immediate Payment Service (IMPS) and FASTag have emerged as pivotal players, making financial transactions faster, more accessible, and secure. As of recent data from the National Payments Corporation of India (NPCI), UPI has set a new record by processing over 16.73 billion transactions, with a staggering transaction value of Rs 23.25 lakh crore. This is a notable jump from Rs 21.55 lakh crore in November. In 2024, UPI processed around 172 billion transactions, marking a 46 per cent increase from 117.64 billion in 2023. This rise underscores a broader cultural shift toward financial inclusivity, with UPI being a central pillar. (ANI)
