The Reserve Bank of India (RBI) said that it has set up a Working Group to undertake a detailed study of growing loans by NBFCs against gold.
The RBI noted that there has been significant increase in loans by NBFCs against gold in the recent period.
There are also complaints against some NBFCs that they are not scrupulously following proper documentation process and know your customer (KYC) norms, among others, in order to quickly dispose off the cases relating to gold loans, the central bank said.
Gold imports have also increased sharply, raising macroeconomic concerns, the central bank observed.
The major terms of reference of the Group include: (i) to assess the trends in demand for gold loans and to study how it has influenced gold imports; (ii) to analyse the implication of gold imports for external and financial stability; (iii) to study the trends in gold price and to examine whether NBFCs extending gold loans have any role in influencing the gold price; (iv) to examine the sources of funds of NBFCs for gold loans, especially their borrowings from the banking system; and (v) to examine the current practices of NBFCs involved in lending against the collateral of gold.
The Working Group is expected to submit the report by end-July 2012.