Gold price fluctuation wont impact loan portfolios: Association of Gold Loan Companies

MUMBAI: The Association Of Gold Loan Companies India (AGLOC) said a 15-20% fluctuation in gold prices will not have any significant impact on the portfolios of gold loan companies. The association has also decided to lower the maximum lending rate on account of dip in gold prices, an official release said.

"The gold loan companies are majorly lending against household jewellery where the impact of such temporary fluctuations on the business model are minimum. These loans are of short duration of 3-6 months. Compared to the disbursements, NPA levels are low," said Muthoot Finance managing director and AGLOC president George Alexander Muthoot.

Since most gold companies' branches are largely located in semi-urban and rural areas and their loan book consists of loans with ticket-sizes below Rs 1 lakh, the probabilities of defaults are low in spite of fall in gold prices, AGLOC said. "AGLOC has asked member companies to review its existing collection mechanism and further strengthen it. There should be regular monitoring of overdue and high loan to value loan accounts. Companies should auction defaulted and abandoned loan accounts with due compliance to fair practice code stipulated by RBI," Muthoot added.