Indel Money Executive Director Umesh Mohanan
Indel Money Executive Director Umesh Mohanan said in an interview that NPAs in the gold loan sector will not go up due to a surge in gold prices. Excerpts of the interview:1. Following the Reserve Bank of India’s (RBI) release of draft guidelines for gold loans last month, the Finance Ministry has suggested that loans below Rs 2 lakh be exempt from the tighter rules, with the new norms taking effect only from January 1, 2026. What will be the impact of the Finance Ministry’s recommendation on the gold loan sector?Ans: When we examine the RBI’s final guidelines for lending against gold and silver collateral, it is evident that they have accommodated all the concerns raised by various stakeholders, including the gold loan industry and the finance ministry. The central bank has given relaxation for loans up to Rs 5 lakh. While the loan-to-value (LTV) ratio for gold loans below Rs 2.5 lakh has been set at 85%, the LTV for loans between Rs 2.5 lakh and Rs 5 lakh is fixed at 80%. It will certainly benefit the small-ticket borrowers, who constitute the majority of customers. Moreover, it will help gold loan NBFC to keep the momentum of their business growth.2. Gold loan companies are receiving secured debt funding from leading asset management companies in the country against their Non-Convertible Debentures (NCDs). Have you received any such funding in the recent past? Does this augur well for the gold loan sector?Ans: Yes. We have received funding from one of the leading domestic AMCs recently. It is the best route for raising capital for the NBFCs. It brings in transparency, accountability, and financial stability to the gold loan industry. Our funding sources are now diversified. It is better to have broad-based, market-linked funding avenues. When you borrow from the market, you will get competitive rates. Additionally, it is a transparent, forward-looking and market-driven process. When more NCD issues hit the market, it will also deepen the corporate debt market, which is largely very positive.3. With a huge surge in gold loan defaults, how do you plan to keep your NPA numbers in check? What measures are you taking to secure transactions?Live EventsAns: There is no alarming growth in gold loan NPAs. When gold prices increase, there is very little chance of more accounts turning into NPAs. In a booming market, there are various options to deal with an NPA – you can either close the loan account or avail a top-up loan facility. Only when the prices fall, we need to worry about the NPAs.4. Gold prices in India have reached unprecedented heights. This surge is expected to continue over the long term, with uncertain global and domestic dynamics, geopolitical challenges, currency fluctuations, and central banks purchasing gold in bulk across the globe. Rising gold prices have enabled higher loan amounts against the same gold jewellery pledged. How would Indel Money make the most of this trend now and in the future?Ans :It is a very positive trend. We will make use of it, complying with the broader guidelines issued by the sector regulator, the RBI. Certainly, we will look at all options to serve our customers better and pass on maximum benefits and incentives to aid loan growth.5. Public sector banks continue to dominate the gold loan market, driven by their agriculture loans secured by gold jewellery. Going forward, do you see NBFCs increasing their presence in the segment? If so, how would they do that?Ans: Yes. PSBs are dominating the market for multiple reasons. Primarily, they have access to cheap funds, a vast network of branches and facilities like safe deposit lockers to attract customers. Further, they can even make use of ‘priority sector lending’ norms for the gold loan purpose. Third, they have an already existing large customer base in every corner of the country. But gold loan is the mainstay of NBFCs, and we have innovative ways to serve our customers better. We are largely innovative in this space, which will help us to advance in the realm.(You can now subscribe to our Economic Times WhatsApp channel)
Read More News ongold loan sectorIndel MoneyReserve Bank of India guidelinesNPAs trendsgold prices surgegold loan defaultsgold loan companiesNBFC fundingFinance Ministry recommendations
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(You can now subscribe to our Economic Times WhatsApp channel)Read More News ongold loan sectorIndel MoneyReserve Bank of India guidelinesNPAs trendsgold prices surgegold loan defaultsgold loan companiesNBFC fundingFinance Ministry recommendations(Catch all the Business News, Breaking News, Budget 2025 Events and Latest News Updates on The Economic Times.) Subscribe to The Economic Times Prime and read the ET ePaper online….moreless