Gold loan non-banking finance companies (NBFCs) will soon approach the Reserve Bank of India (RBI) to voice their concern over the tightening of lending norms.

The Association of Gold Loan NBFCs will meet in Kerala on Wednesday to firm up their views on the RBI circular, Mr George Alexander Muthoot, Managing Director of Muthoot Finance, said. After that, the Association members would meet the RBI later this week, he said.

Muthoot Finance is a leading player in the gold loan business and is primarily engaged in lending against household jewellery.

Advantage banks

Mr Muthoot said that they would not demand withdrawal of the circular, but would seek clarity on certain aspects. He, however, declined to elaborate on specific concerns or issues that needed clarity.

Besides stipulating that loan-to-value (LTV) ratio should not exceed 60 per cent, the RBI had, in a recent circular, mandated that such NBFCs should maintain a tier-I capital of 12 per cent by April 1, 2014. The central bank had also said that such NBFCs should not grant any advance against bullion/primary gold and gold coins.

Gold loan NBFCs are upset about the RBI circular as it will put them at a further disadvantage compared with commercial banks.

While banks can lend 140 per cent of the gold value, these NBFCs can now give loans only to the extent of 60 per cent.

FM's stand

The Finance Minister, Mr Pranab Mukherjee, had on Saturday last made it clear at an industry event that tightening lending norms was an independent decision of the RBI and his Ministry had no role in it.

He also said that the Finance Ministry would not like to tamper with RBI's autonomy in the administration of banks, its credit policy and, more so, in its dealing with the NBFCs.

“A lot of problems are there (as regards NBFCs) and you can make your representation before the RBI. I am quite sure they will look into it,” Mr Mukherjee had said.

>krsrivats@thehindu.co.in

Related Topics