RBI mulls use of cheques for loans against gold

WHAT'S UP

Expecting excessive heating up of the gold loan business in the country, the Reserve Bank of India (RBI) recently came out with regulations, limiting gold financing companies to give only up to 60% of the value of gold kept as collateral as loan. It also stopped the practice of acceptance of public deposits by subsidiaries of some gold loan companies through surrogate branding. Now the buzz is that the central bank is working to limit the amount of cash that gold loan companies can give its customers. The most likely change in rules could be that beyond a certain limit, say Rs 50,000 per loan, the advances should be through cheques. The move is aimed at limiting the use of hard cash in this flourishing business. And RBI's move would surely help in establishing some trail about the use of funds from gold loan, even if not the source of money used to buy the gold that is being kept as collateral.