Mumbai: A domestic rating agency on Tuesday said the Reserve Bank's recent notification asking financiers to review their gold loan behavior could slow down credit growth in the near future and increase asset quality stress. Is. “Potentially, this could impact gold loan disbursements during the transition phase and hamper business growth,” the CRISIL note said. It is worth noting that a few weeks ago, RBI had flagged certain irregular practices in loans against gold jewelery and asked lenders to review their policies, procedures and practices to identify gaps and initiate remedial measures in a timely manner. Was asked to conduct a comprehensive review. The notification flagged deficiencies in monitoring the loan-to-value (LTV) ratio, asset classification norms for overdue loan accounts and inadequate due diligence in monitoring the end-use of gold loans. The agency said some increase in reported loan defaults may be seen as institutions are revisiting their existing non-performing asset (NPA) recognition norms and/or policies and procedures for disbursing loans to existing customers. However, it was quick to add that in the gold loan business, loan cost is a more appropriate indicator of asset quality and overall loan losses are seen to be under control because of the emotional attachment Indians have to the precious metal.
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