Gold Loan: 3 months ultimatum on gold loan, RBI found irregularities, asked for full details from banks..

Gold Loan: RBI has given a 3-month ultimatum to banks and finance companies (NBFCs) to improve the policy related to gold loans. Bank regulator RBI has asked all financial institutions to expose irregular practices including hiding bad loans, as well as identify any gaps in their loan policy and appeal to eliminate the shortcomings. RBI has given 3 months to banks and finance companies in this regard. During this period, banks will have to give a plan for reform in the gold loan policy. RBI warned that regulatory action will be taken in case of non-compliance.

Why did RBI take this step?
RBI has adopted this strict attitude regarding gold loans because the regulator had found many irregularities in the gold loan operation during the investigation. During the gold loan review, it was found that top-up loans were being used without new evaluation and loans were being given even after partial payment.

What is a gold loan
Gold is a secured loan given against a pledge of gold jewelry. In this, banks decide the loan amount based on the price of gold. The special thing is that, unlike other loans, taking a gold loan does not require many documents and it is available very quickly.

The biggest advantage of taking a gold loan is the interest rate charged on it because the interest rate on a gold loan is lower than that on a personal loan. Since jewelry is kept as collateral in a gold loan, banks do not require any kind of security.