The Reserve Bank of India (RBI) is considering stricter regulations on the agricultural gold loan sector following significant growth, according to five anonymous sources cited by NDTV Profit.
As of March 2024, outstanding agricultural gold loans in the banking system reached Rs 6.5 lakh crore, representing a 27% year-on-year increase, according to ICRA Ltd. In comparison, regular bank loans secured by gold jewelry totaled Rs 1.03 lakh crore, as reported by RBI data.
Agricultural gold loans are essentially crop loans or loans issued for agricultural purposes, secured by gold pledges, and are classified under priority sector lending. Analysts note that primarily public sector banks, regional banks, and some non-banking financial companies dominate this lending space.
For the quarter ending in September, agricultural gold loans accounted for 82% of Karur Vysya Bank’s total gold loan portfolio, which amounted to Rs 20,878 crore. One of the sources mentioned that the RBI might be worried about potential misuse of these loans, as the outstanding dues significantly exceed those of other crop loans. An email sent to the RBI for comments on this issue has yet to receive a response.
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