Banks to get upper hand in gold loan market

The Reserve Bank of India(RBI)’s measures on bellwether IIFL Finance is likely to give banks an upper hand in the gold loan market, say experts. 

This is primarily because non-banking finance companies (NBFCs) may have to re-assess disbursement models. In addition, they may have to deploy stringent measures to meet compliance.

As of September, NBFCs hold a 61% share in gold loan segment, while banks hold the remaining 39%. 

Overall gold loan credit rose to Rs 2.5 trillion as on September 30 from Rs 1.9 trillion as on March 2021, a recent report from CRISIL Ratings.

Earlier in March, the RBI directed IIFL Finance to stop sanctioning, disbursing, assigning, securitising, selling any of its gold loans.

However, the company can continue to service its existing gold loan portfolio through usual collection and recovery processes.