Loanees desperate as Reserve Bank of India tweaks norm

THIRUVANANTHAPURAM: With the Reserve Bank of India  imposing strict restrictions on the gold loans (GL) renewal facility and agricultural gold loan (AGL) disbursement by the banks,  scores of loanees are desperately trying  to raise funds, including from loan sharks,  to close the gold loans.

Banking sources said that the misuse of AGL given on subsidised interest and accumulation of non-performing assets  in the GL sector had prompted the RBI to tighten the gold loan scheme. A whopping Rs 25,532 crore was disbursed as AGL by Kerala banks during April-December last year and Rs 5,230 as other GLs.

Most banks had been allowing renewal of GLs by closing the existing loan and at once pledging the same ornament for  a fresh loan. Hence, the customers did not have to raise the funds. GLs are given for a maximum of one year. With the fresh restrictions, once a GL is closed, a fresh GL could be availed of by the same person only after a day. Hence, the customers will have to give cash to close the loan.

“The renewal facility was an informal service offered by banks  over these years. Hence, the sudden restrictions are causing severe inconvenience to customers,”  an official of the Union Bank of India told DC.

The norms for sanctioning AGL with subsidised interest rate of four percent have been tightened due to massive misuse. Many banks had been disbursing up to Rs 3 lakh  based on land tax receipt.

But now banks are insisting on physical inspection of agricultural land. Many banks are even sending notices to AGL customers to immediately close the loans or produce evidence of agriculture.

“A major chunk of the loans allowed under AGL was  not for agricultural purposes. Even instances of persons availing of AGL at four percent interest and making fixed deposits at 10 percent  were noticed,”  a State Bank of Travancore official said. The unexpected tightening of norms by the banks is forcing many customers to approach loan sharks to raise the required funds.  

The money lenders, who had suffered a setback following the Operation Kubera launched by the state police, are  cashing in on the opportunity by demanding more interest.