Gold loan is very easily available in emergency. Not much documentary evidence is required to take a gold loan. It is noteworthy that gold has become costlier by more than 17 percent so far this year. In such a situation, according to a news, banks have asked all the branches not to renew the gold loans of people who do not pay the installments. Banks have instructed the branches to ask the gold loan customer to repay the loan amount and close the loan and not to renew it. However, once the loan account is closed, the customer can take a new loan again.
Game of non-payment of loan installments
It is often seen that if a person has taken a gold loan and due to some reason he is not able to repay the loan monthly. In such a situation, after some time the loan amount increases, which impacts the customer. At the same time, the price of gold also increases with time.
In such a situation, the customer goes to the branch from where he has taken the gold loan. He goes there and gets the loan renewed. In such a situation, the customer gets relief from heavy fine and default of installment. However, on renewing the loan, one has to pay a higher installment. Usually the customer gets gold loan up to 75 percent of the value of gold.
This is how the upgrade happens
Banks have different interest rates and tenures for gold loans, while banks also provide various options to repay it. In this, installments are paid on monthly basis. Apart from this, there is also a bullet payment plan which provides the facility to repay the interest and principal amount of the loan taken against gold at the end of the loan tenure.
TRAI’s preparation to impose heavy fine on unwanted callers
For example, the customer’s jewelery was valued at Rs 1 lakh. After this, due to increase in the market price of gold, the price of these mortgaged jewelery increased to Rs 1.5 lakh, then the customer requested the bank to get the loan increased to Rs 1.50 lakh and on upgrading the loan, he gets another Rs 50 thousand. However, his installment also increases. Now banks have been instructed not to upgrade the customer’s loan. Ask him to repay the full amount and take a new loan.
Consumers may move to informal sector: Fitch
The Reserve Bank of India has been continuously pressuring lenders to strengthen risk management to reduce long-term risks. Rating agency Fitch Ratings believes that these steps will increase the instability of lenders’ business in the near future.
Fitch said, the limit set by the RBI on taking cash loans against gold will force some NBFCs to give loans from bank accounts, which may slow down the rate of new loans. Some borrowers who still prefer cash loans may turn to available options such as the informal sector, the rating agency said.
