Kindly see
the draft Letter to Honourable Finance Minister addressing issues related to
gold loans and regulating non-banking financial institutions. Please suggest
changes, if any
To
The
Honourable Minister for Finance,
Government
of India,
New
Delhi.
Subject:
Addressing Issues Related to Gold Loans and Regulating Non-Banking Financial
Institutions
Madam,
On behalf
of People for Better Society (PEBS), I wish to bring to your attention a
pressing financial issue affecting the common citizen. Non-Banking Financial
Companies (NBFCs), particularly in the private sector, are exploiting the
financial vulnerability of the public by offering gold loans at exorbitant
interest rates, often exceeding 20%, accompanied by hidden charges. This
practice is enriching these firms while depleting the meager savings of the
poor, who are left with no alternative but to pledge their gold assets.
Although some public sector banks
(PSBs) adopt a customer-friendly approach to gold loans, others show reluctance
or direct borrowers to private lenders. This inconsistent behavior stems from
the attitude of officials rather than policy directives. Given the high
liquidity and security of gold as collateral, PSBs should prioritize gold loans
and enhance their approach to make these loans more accessible and
competitive.
We propose the following measures for
the Government of India and the Reserve Bank of India (RBI) to consider:
1. Setting
Gold Loan Priorities: PSBs should be assigned specific targets for gold loan
disbursements to encourage prioritization.
2. Public
Awareness Campaigns: RBI should launch campaigns to educate the public about
the benefits of PSB gold loans, including lower interest rates and
transparency.
3.
Complaint Mechanisms: Establish a grievance redressal system for customers
facing delays or rejections in gold loan applications.
4.
Simplified Procedures: Ensure that PSBs offer gold loans with minimal
documentation, enabling disbursement within 30 minutes.
5. Uniform
Interest Rates: Standardize interest rates across all PSBs and offer
competitive loan amounts.
6. Enhanced
Loan Terms: Allow up to 90% of the gold’s market value as a loan for a tenure
of up to three years, reducing the current need for yearly renewals.
7.
Modernized Appraisal: Introduce modern appraisal equipment and train employees
to minimize costs and improve efficiency.
8. Reduced
Charges: Consolidate processing and appraisal fees to a flat Rs. 300/-.
9.
Dedicated Counters: Open separate counters in PSBs with trained appraisers to
handle gold loans exclusively.
10.
Improved Customer Service: Enhance customer relations in PSBs to match the
efficiency of private lenders.
11. Special
Concessions: Extend gold loans to individuals with a history of timely repayment
under MUDRA, MSME, or agriculture loans at concessional rates.
12. Regulating
NBFC Interest Rates: Cap the interest rates charged by NBFCs on gold loans to
prevent exploitation.
By
implementing these measures, the government can ensure that gold—a highly
liquid and secure asset—is managed efficiently within the public sector. This
will not only protect citizens from predatory practices but also strengthen the
financial position of PSBs while minimizing Non-Performing Assets (NPAs).
We
sincerely hope that these suggestions will merit your kind consideration and
pave the way for a fair and equitable gold loan ecosystem in India.
With
regards,
V.R. Ajith
Kumar
President,
People for Better Society (PEBS)