The Reserve Bank of India (RBI) has warned banks about giving gold loans through fintech startups. They’re worried about how these banks and fintech companies evaluate the gold, especially where it comes from. According to ET’s report, the RBI has talked to some banks about these concerns and told them to fix things immediately.
The banks that got the warning are talking to the fintech startups to fix the problems mentioned by the RBI. This might pause their business for a bit to ensure they follow all the rules.
RBI Keeping a Close Eye on Gold Loan Business
The Reserve Bank of India (RBI) is closely monitoring the gold loan business, especially after the IIFL Finance issue. Even though banks haven’t stopped giving out loans through fintechs immediately, they’re thinking hard about what to do next.
The RBI is checking fintechs very closely to ensure they’re following all the rules, especially when lending money. They’ve even canceled the licenses of some fintechs for not following the rules properly. Paytm was one of the most important ones to be affected. Recently, the RBI made some new rules for fintechs to follow when lending money.
A big part of the gold loan business is assessing the value of the gold and lending money based on that. According to RBI rules, lenders can only give out loans up to 75% of the gold’s value.
Some problems might be related to the amount of field staff involved and whether the gold is being valued correctly. Fintechs usually check the gold at the customer’s home first and then again at the bank. The RBI might have found differences between these checks during their audits.
People in the industry say that doorstep gold loan services have been around for a while, even with public sector banks, so there shouldn’t be a problem with how fintechs check the gold’s value.
RBI Cracks Down on Digital Lending Apps
The Reserve Bank of India (RBI) is ensuring borrowers know who they’re dealing with before borrowing money. They’re targeting platforms like Paisabazaar, BankBazaar, CreditMantri, and Paytm, which connect borrowers to banks and other financial companies. Recently, the RBI cancelled the license of Acemoney (India) because it didn’t follow the rules for managing risks and behaving properly when using third-party apps for lending.
The RBI also plans to create a new organization called Digital India Trust Agency (DIGITA) to stop the growth of illegal lending apps.
RBI Warns Lenders After IIFL Finance’s Issues
The Reserve Bank of India (RBI) is warning lenders because of what happened with IIFL Finance’s gold loan business. On March 4, the RBI said IIFL Finance made mistakes, so they stopped its gold loan business until they finished a special checkup and fixed the problems.
The Big Players:
- Rupeek: It’s the biggest platform for getting gold loans in India. According to a report from February 22, their loans were Rs 1,659 crore in December last year, a bit lower than Rs 1,669 crore in March 2023. However, the number of loans that were late by more than 90 days dropped from 4.1% to 2.3%. They work with the Federal Bank, Indian Bank, and South Indian Bank.
- Indiagold: They work with Shivalil Small Finance Bank, HDFC Bank, and Bank.
- Federal Bank: In the last quarter, they sanctioned Rs 25,085 crore of gold loans, 17% higher than the previous year’s Rs 21,425 crore. Gold loans are the biggest type of loan for this Kerala-based bank.
- Axis Bank: They also had a big increase in gold loans. Their data shows that gold loan payouts grew a lot, with a monthly growth rate of 94% in the second half of FY24.
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