Restrictions on gold loans, suicidal for common man

The Reserve Bank has issued instructions to banks to impose some strict rules on gold loans. Those who sit in ivory towers and impose strict rules are not only not obliged to understand the mental and emotional problems of the poor and common people of the country, but they can never fully comprehend them. Women, regardless of whether they are rich or poor, have an innate love for gold. Gold is important not only as an ornament but also as a metal with increasing value every day. The common people rely on gold ornaments first to find money in an emergency.

It is not easy to get a loan from banks and other sources against property and other collateral. No bank will give loans to a borrower if they do not have a sufficient CIBIL score. Gold loans are a lifeline for the middle class and the poor in times of emergency. Although the Reserve Bank of India has imposed some restrictions on gold loans to increase consumer interest, in reality, it will only help private institutions that provide money through gold loans. The draft proposal states that the loan period for those using bullet payments, which are loans that are renewed or settled just before the loan term expires, should be 12 months.

Only loans up to Rs 5 lakh can be availed from cooperative banks and regional rural banks through bullet payments. The RBI draft also states that multiple gold loans can no longer be availed against a single collateral. There has been a 30 percent increase in gold loans given by banks in the country from September to February last year. This is the reason behind the RBI's decision to tighten the rules. The main reason why people are taking more loans against gold is the increase in the cost of goods and services, education and healthcare. It is suicidal to conclude that everyone is taking money against gold and committing fraud without understanding this.

The stringent restrictions imposed on starting a business in India had held back the country's growth for decades. India started to industrialize after the end of the license raj. Officials can never understand the living conditions and mindset of the people, but the people's representatives can. Therefore, the Union Finance Ministry should take steps to exempt those who take gold loans up to at least Rs 5 lakh from the new legal provisions of the Reserve Bank. Those elected to the Lok Sabha should put pressure for this.