Banks cautious over gold loans to jewellers

The jewellery industry in India is finding it difficult to avail gold metal loans and the high cost loans are affecting the operating margins of the jewellers, says a report.

The report further adds that while re-instating the loans in May 2014, RBI also had asked banks disbursing gold metal loans to carry out independent credit appraisal of the borrower and not rely solely on stand-by letter of credit or bank guarantee issued by other banks. Now-a-days, few banks are offering the loans but the larger banks are not actively lending the industry. It takes around three to four months for the loan disbursal instead of 10-15 days. Besides, earlier, old loans used to get automatically renewed on maturity of 180 days. Now renewals too are not happening, adds a report.

As per the reports, gold metal loans carrying an interest rate of four to six per cent were offered by banks as a commodity loan for gold to the jewellers. These are short-term loans with a maximum maturity of up to 180 days for jewellery manufacturers and 270 days for exporters. Government withdrew the facility in 2013 after the current account deficit continued to widen due to higher gold imports.

Besides, there is huge difference in interest rates offered in the country and at the international level. , While in the international market gold metal loans are available for jewellers at 0.5 per cent, in India, the jewellers get loans at a rate of four to six per cent. The industry is keen on getting the interest rates to be lowered to at least three per cent so that Indian exports can become competitive in the global market, adds a report.