New RBI regulations on lending against gold
The government reiterated its strong resolve to contain the import of gold, by banning advances for the purchase of gold of any kind and reducing the limit up to which loans can be disbursed.
April 24, 2019 / 19:34 IST
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The rise and fall in the price of the precious metal has been more dramatic than the climax of a typical Bollywood masala flick. The government and the finance authorities of the country are also in no mood to take things lightly, as the alarming level of the Current Account Deficit needs to be tackled immediately. This has led to it taking some serious steps out of the blue, which are meant to prevent further deterioration of the situation, by controlling the import bill of the country. Also read: Government hikes gold, platinum import duty to 8% from 6%The supreme monetary authority of India has issued new guidelines and rules for the disbursal of loans and advances against gold assets of any kind, in attempt to curb the buying of gold. The people of India have been known for their passion of gold, and bringing the usage down to manageable levels will not be that simple a task. The apex organization in its move has put in special provisions for the disbursal of loans and has also put a cap on the maximum amount of gold which can be used to give loans against. The gold ETFs and MFs on the other hand are in no position to claim advances, as the RBI has completely banned the issuing of advances against them. The orders given under the new guidelines and rules would cover all banking institutions as well as all Non-Banking Financial Companies, in order to ensure complete coverage of the scheme. The RBI has put a limit of 50g on the maximum weight of specially minted gold coins against which loans can be given, and has also ordered disbursals of loans against jewelry to be according to the prescribed limits. Purchase of any form of gold, whether it be from the bullion market, jewelry, gold coins, gold Exchange Traded funds or Mutual Funds would not be eligible for advances from any financial organization. The precious yellow metal has got the country into trouble in recent times, not only from the significantly high import bill, but also by the steep reduction in its pricing in the recent times. The moderation has left little headroom for companies giving out loans against gold assets, and has put them in danger of facing severe losses. Also the value of the assets possessed by the people has come down significantly, which has worried the authorities. The new guidelines that impose restrictions on the usage of gold as a financial tool, is meant to reduce the popularity of gold as a safe investment option and thereby curb the intense buying that the average Indian is known for.
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