RBI issued a big order for gold holders. After taking the loan, you will have to pay EMI accordingly.
Reserve Bank of India (RBI) has taken a big step in the interest of customers regarding gold loan. Now customers taking gold loan will get the option to pay in monthly installments (EMI). This new rule may prove to be a relief for those customers who till now felt the pressure of bullet payment (repaying the entire amount at once at the end of the loan tenure).
What is the new instruction?
RBI has instructed companies and banks providing gold loans to give customers the option of payment in monthly installments like home and auto loans. Apart from this, banks and companies will also have to assess the paying capacity of the customer. Giving loan only on the basis of pledged jewelery will not be sufficient.
Current Status of Bullet Payment
Till now, the trend for gold loans is bullet payment, in which the customer repays the entire amount of principal and interest together at the end of the loan tenure. This facility sometimes proves to be cumbersome for the customers.
RBI's concerns and reform initiatives
RBI had warned gold loan companies in a circular issued on September 30. It said a lack of transparency was found in the sourcing, appraisal, and auction process of gold loans. Also, the tradition of partial payment was also said to be wrong.
Growing market of gold loan
- CRISIL report: Gold loans increased by 37% between April and August 2024.
- Reason for increasing demand: Increase in gold prices and increased use of gold loans for financial needs.
Monthly Installment Option: Benefits
- Less burden on customers: Instead of bullet payments, monthly installments will make it easier for the customer to manage money.
- Transparency: Due to timely payment, there will be correct accounting of interest and principal amount.
- Ease of repaying the loan: Regular payments will reduce the pressure on the financial condition of customers.
- Financial Discipline: Monthly installments will motivate customers to make timely payments.
news at a glance
| Speciality | current situation | new instruction |
|---|---|---|
| payment options | bullet payment | Monthly Installment (EMI) |
| impact on customers | It is cumbersome to pay the entire amount at once. | Easy and regular payments |
| RBI's role | Emphasis on the need for reform and transparency | It is important to assess the customer's paying capacity. |
| market growth | 37% (April-August 2024) | Continuous increase in gold loans |
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