Breaking News
1. Rouse Avenue Court extends judicial custody of Manish Sisodia and other accused till July 26      2. Supreme Court hearing NEET-UG issue      3. Singer Rahat Fateh Ali Khan arrested in Dubai: Reports      4. Assam CM Himanta Biswa Sarma meets PM Narendra Modi in Delhi      5. India needs to strike balance between import of goods and FDI inflows from China: CEA      6. INDIA bloc to convene meeting tomorrow      7. India's forex reserves surge to record high of $666.85 billion as of July 12      8. Hatred is in the veins of BJP: AAP MP Sanjay Singh      9. Union Home Minister Amit Shah chairs high level meeting with various Heads of Security and Law Enforcement Agencies      10. UP Vidhan Sabha session will begin from July 29      11. Indrani Mukerjea allowed 10-day abroad travel by special CBI court in Mumbai      12. Andhra Pradesh: Union Minister Nitin Gadkari visits Tirumala Venkateshwara Temple in Tirupati      13. Encounter breaks out in J-K's Doda      14. Moderate to heavy rain is expected in Mumbai, its suburbs today      15. Karnataka: Truck and tanker drivers stranded in Akola's Shirur due to landslide      16. Heavy rainfall triggers waterlogging in Mumbai      17. Navdeep Singh farmer activist walks out of jail after getting bail      18. NCB arrests man wanted in Rs 60 crore mephedrone seizure case      19. PM Modi likely to visit BJP headquarters on Thursday, to address party workers: Report      20. Union Cabinet to meet tomorrow, 18th July at 10:30 AM: Report     

Banks seeks to end ‘evergreening’ of gold loans

  • Posted on June 13, 2024
  • News
  • By TSW NEWS DESK
  • 301 Views

Banks have been instructed to ensure gold loans are fully repaid at maturity, ending the practice of evergreening by issuing new loans to prevent existing ones from turning delinquent.

1718253024-WTYTStQdF9.png

Large banking sectors have directed their branch networks to ensure that all gold loans availed by the customers are paid in full at the end of the loan period and the habit of renewal/up gradation of such gold loans has been ceased.

The Reserve Bank of India has commented on the problem of ‘evergreening’ of gold loans, through which new loans are made to borrowers not to let existing gold loan accounts become nonperforming. This is usually achieved by increasing the amount of loan that is given to the borrower if the price of gold goes up, where the borrower can make the additional amount by paying the difference in interest.

Evergreening had been another practice, where fresh loans are extended so that an existing loan is not likely to turn bad When the gold prices rise, the people who have not paid interest properly approach the bank for an upgrade and open a new loan account, stated R. S. Dhuriyan, an advocate for Indian Bank.

For instance, if a borrower pledged ₹1 lakh worth of gold to secure a loan and there was a subsequent appreciation of the prices to ₹1. 5 lakh, the customer could try to persuade his or her company to switch to a ₹1. 5 lakh loan to pay only the extra interest on it with ease.

However, RBI guidelines do not allow evergreening of this nature. Following recent audits, the regulator has required banks to implement the rules and manage the existing gold loans, including exiting from them after the term.

A gold loan borrower, who recently went to pay interest, was told by a bank official that he cannot renew the loan after the tenure expiry Many customers have paid only interest and rolled over the loan, Subha, a borrower from Pattabiram.

From the bank officials, it was established that they had been given oral directives to cease extending credit to customers with matured gold loans under the guise of evergreening the loans in order to enhance prudent lending practices.

Also Read: Uttarakhand Money Laundering Probe: ED Confiscates Cash, Gold in Raids Targeting Former Minister Rawat

Although consumer activists acknowledge the rationale behind the RBI guidelines, they claim that the banks should have informed the customers earlier about the timely repayment of gold loans.

Author
No Image
Author
TSW NEWS DESK

You May Also Like