There are two key factors behind lenders’ enthusiasm for gold loans: They are backed by full collateral and, since they are fully secured, banks do not need any capital to back such loans (Photo: Unsplash)

Early this month, the Reserve Bank of India (RBI) directed IIFL Finance Ltd to cease and desist from sanctioning, disbursing and selling gold loans with immediate effect. IIFL Finance, however, can continue with its existing gold loan portfolio and carry on the usual collection and recovery processes.

Why has the banking regulator taken such a step?

The RBI’s inspection of IIFL Finance’s gold loan book had revealed serious deviations in assaying and certifying the purity and net weight of the gold while sanctioning the loans and auctioning the yellow metal for recovering money from loan defaulters. It had also found

First Published: Mar 17 2024 | 6:33 PM IST

Source link