Fulfilling the long pending demand of the cooperative sector, Reserve Bank of India has extended the limit of gold loans for bullet payments from the existing Rs 2 lakh to Rs 4 lakh.
RBI issued a circular in this connection on Saturday with the title, “Gold Loan – Bullet Repayment – Primary (Urban) Co-operative Banks (UCBs)”.
Reacting to this, Nafcub President Jyotindra Mehta said, “We are happy that RBI has started addressing the issues of the Urban Cooperative Banking sector. It was a long pending demand, which has been fulfilled by the RBI. This will help the Urban Cooperative Banks serve the middle-class people in society”.
“The small UCBs are having less exposure, and a gold loan is secured. Besides, the interest rates given by cooperative banks on gold loans are very affordable and cheap in comparison to NBFCs, which are charging interest rates of around 17 percent.
Maharashtra Urban Cooperative Banks Federation Chairman CA Ajay Barmecha said, “We hailed the decision of RBI and we have been demanding it for many years. It is a good decision and in the interest of the urban cooperative banking sector. Though we had demanded increasing it to Rs 5 lakh, we are okay with the decision of Rs 4 lakh”.
“Of the total loan portfolio of UCBs, about 20-25 percent is gold loan. The increase in the limit was the need of the hour especially when the prices of gold are touching the sky”, Barmecha added.
Andhra Pradesh State Cooperative Urban Banks and Credit Societies Federation Secretary Chalasani Raghaendra Rao said, “We welcome the decision but it is unfair for the UCBs sector to link it with the Priority Sector Lending (PSL). Earlier, there was no such provision but this time RBI linked it with the PSL”.
“As far as the gold loan is concerned, the commercial banks are free to frame their own policies. My suggestion is that RBI may put some restrictions on tier-1 category UCBs but should give a free hand to UCBs that fall in Tier-2, Tier-3 and Tier-4 categories”, stated Rao.
The RBI’s circular reads, “It has been decided to increase the monetary ceiling of gold loans that can be granted under the bullet repayment scheme, from Rs 2.00 lakh to Rs 4.00 lakh for those UCBs who have met the overall PSL target and sub targets as on March 31, 2023 and continue to meet the targets and sub-targets as prescribed at para 2 of our circular dated June 8, 2023, ibid.
It bears recalling that the issue of extending the gold loans limit was also raised at the standing advisory committee meeting of RBI held recently and the meeting of cooperators associated with Urban Cooperative Banking with the RBI Governor Shaktikanta Das in Mumbai.