Need to improve declining CAR of gold loan NBFCs: RBI

Also says banking sector's existing exposure in the form of individual gold loans is small small, will not have significant impact on stability of the banking sector at present

The Reserve Bank of India (RBI) on Wednesday said that there is a need to improve the declining capital adequacy ratio of gold loan Non-Banking Finance Companies (NBFCs).

RBI made this point in its final report of the working group placed on its website to study issues pertaining to gold imports and gold loan. The report focuses on moderating the demand for gold imports, considering its impact on the Current Account Deficit (CAD).

“A combination of demand reduction measures, supply management measures and measures to increase monetisation of idle stocks of gold need to be put in place,” the report said.

The report also said that banking sector’s existing exposure in the form of their individual gold loans appears small and may not have any significant repercussions for the stability of the banking sector at present.

As per the report the recent slew of regulatory measures taken by the central bank on the functioning of the gold loan NBFCs may be continued to ensure a healthy growth of the sector in the medium and long term.