Gold Loans Now No Longer A Cash Cow

  Author: Sanjay Sharma

Here is one more addition to the growing evidence of government’s determination to reduce the use of cash in the country. Last month, the RBI has mandated that non-banking finance companies (NBFCs) cannot disburse gold loans of more than Rs 20,000 in cash. For those of you, who have never taken a cash loan for gold, be informed that the previous limit was Rs 1 lakh. Therefore, loans of more than Rs 20,000 will now have to be given out only through cheques by the NBFCs.

Laudable though the move might be, NBFCs argue that this might not be great news for many borrowers, most of whom take gold loans below Rs 1 lakh. They argue that people typically need these loans for emergency cash requirements such as those for medical emergencies. The other new condition for gold loans in excess of Rs 20,0000 is that these loans can’t be availed of by people not having bank accounts. Clearly, the noose is clearly getting tightened for unaccounted money and gold loans is just the latest dark territory to get covered.