The present framework limits co-lending to partnerships between banks and non-banking financial companies (NBFCs) to priority sector lending such as agriculture, micro-enterprises and loans to weaker sections
Rating agency ICRA reported that banks continue to dominate the gold loan market, primarily due to gold jewelry-backed agricultural loans. As of March 2024, public sector banks (PSBs) held approximately 63% of the total gold loans, an increase from 54% in March 2019, while the shares of non-banking financial companies (NBFCs) and private banks declined equally during the same period.
The revised regulations, effective January 1, 2025, will align the rules for Housing Finance Companies (HFCs) with those for Non-Banking Financial Companies (NBFCs), the RBI announced. Currently, HFCs accepting public deposits operate under more relaxed prudential parameters compared to NBFCs.
This is because the move will help them in strengthening their balance sheet by improving their leverage ratios and creating a buffer or reserve and surplus for fresh lending.
With the Covid-19 pandemic-driven lockdowns being lifted slowly and economic activity clawing back, demand for gold loans would rise, especially from individuals meeting urgent personal requirements
