What is the new rule of gold loans?

New Delhi, March 19-Congress MP from Tamil Nadu, Manickam Thakur, has moved an adjournment motion in the Lok Sabha against the changes made in the rules for gold jewellery loans.

Gold loan

Amendment in gold jewellery loan rules

In a letter to Speaker Om Birla, he said, According to the new rules, customers will have to repay the entire principal amount along with interest at the end of the loan tenure, and after doing so, they can pledge their jewellery for a new loan or renew the loan the very next day.

This is likely to cause difficulties especially for customers who are already in financial difficulty, as under the existing rules, they were allowed to repay only the interest during the loan tenure.

At the end of the loan tenure, when they were unable to repay the entire principal amount, they were renewing their loan accounts. The current new rule is causing more suffering to the borrowers.

To such a question, the Finance Minister had replied on the 10th:

To protect lenders from risks such as fluctuations in gold prices and valuation errors, as per the current instructions of the RBI, banks and non-banking financial institutions are not allowed to provide loans exceeding 75 percent of the value of the jewellery.

Furthermore, to reduce the risk of default, loans are not allowed to be extended beyond 12 months from the date of bank approval," he had said.