RBI norms will moderate growth of gold loan companies, says Crisil

The Reserve Bank of India's recent guidelines for the gold loan sector will significantly moderate the growth and profitability over the next year, said a Crisil report.

“Business growth is likely to fall from 80 per cent per annum to 20-25 per cent per annum and return on assets is expected to fall from the currently high level of 4.5 per cent to 2.5-3 per cent,” the rating agency said.

However, the guidelines will reduce regulatory uncertainties that the sector has witnessed and enhance stakeholders' confidence, it said.

The guidelines will also enhance the gold loan companies' ability to absorb the impact of sharp decline in gold prices, improving the sector's asset quality.