Gold loan non-banking finance companies (NBFCs), that are currently facing a liquidity crunch, have urged for fiscal measures in the upcoming Union Budget 2024 to infuse liquidity in the system and introduce a partial credit guarantee scheme to cover NBFC’s onward lending to micro-enterprises.
The gold loan NBFCs have also urged the Centre for granting ‘priority sector status’ to gold loans and allowing a ‘Gold linked credit line via UPI’ that can go a long way to help households/small business owners meet their financing needs and monetise idle gold jewellery.
Umesh Mohanan, ED & CEO of Indel Money said “Since the cost of funds is very high, gold-loan NBFCs are currently facing a liquidity crunch. RBI’s recent decision to impose restrictions on banks on lending to NBFCs also made the situation tight. So, the overall restrictive monetary condition is affecting the liquidity of the gold-loan financiers. In this backdrop, we demand fiscal measures in the upcoming Budget 2024-25 to infuse liquidity in the system. SIDBI or NABARD can be made a nodal agency to provide liquidity support to the cash-strapped NBFCs.”
“Another major demand is that the Centre should introduce a partial credit guarantee scheme to cover NBFC’s onward lending to micro-enterprises. The objective of the credit guarantee scheme is to strengthen the credit delivery mechanism and to facilitate flow of credit to the MSMEs and other under-served segments. Above all, we expect regulatory easing in the Budget to push digital lending further and to facilitate deeper and wider collaborations, such as co-lending partnerships, between banks, NBFCs and fintechs,” he said.
George Alexander Muthoot, managing director of Muthoot Finance said “Indian households possess up to 25,000 tonnes of gold which lies idle and can be leveraged as an immediate and reliable source of financing to meet immediate personal or business needs.
“We believe giving priority sector status to eligible gold loans will benefit the bottom of the pyramid and enhance financial inclusion. Typically small borrowers need loans under Rs 50,000 (about 20 grams of gold collateral) for short durations like a year. Herein gold loan NBFCs can play an important role to fulfill the needs of small borrowers, self-employed, micro business owners, and help address their finance needs or working capital needs. Gold loans against jewellery also is a vital funding source for MSMEs. Gold loans provided by banks to farmers do get priority sector status, but not gold loans provided by NBFCs. Extending priority status to all micro gold loans (under Rs. 50,000) by removing the current distinction between NBFCs and banks can enable gold loan NBFCs access to increased funding,” he said.
