NBFCs slash gold loan amount as price of gold heads South

KOCHI: The gold loan NBFCS have reduced the maximum lending amount against the jewellery following the fall in gold prices. The RBI directive capping the loan given against the value of jewellery by NBFCs at 60% came early last year. But as the gold prices were rising, the Association of Gold Loan Companies, India ( AGLOC), an organisation of major gold loan NBFCs which decides the maximum lending amount for the week, had to fix a higher amount. The maximum lending amount had risen to Rs 2,050 per gramme in November 2012.

But now the association has fixed the maximum amount at Rs 1,800 per gramme, the lowest in the last one year or so. The rate is fixed after taking account the making charges of the ornament. The members say that loan demand continues to be strong despite reduction in the amount lent per gramme of gold. Allaying the fear of defaults with gold prices crashing, AGLOC president George Alexander Muthoot said there is regular redemption of earlier loans sanctioned at higher amount per gram of gold. According to him, the association is closely monitoring the gold price movements to notify any changes in the maximum amount of loan per gramme of gold.

Immediately after the RBI directive on the 60% cap, the NBFCs had reduced the maximum interest rates from 24% to 22-23 % to attract more customers as the banks were exempted from the restriction. The NBFCs have not made any further changes in the interest rates so far.