RBI tightens jewellery loan norms further, gold shares fall | india | Hindustan Times
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RBI tightens jewellery loan norms further, gold shares fall

india Updated: Mar 27, 2012 22:24 IST
HT Correspondent

A day after the Reserve bank of India announced stricter norms for non-banking finance companies (NBFCs), shares of gold finance companies fell 7-11% on the BSE on Tuesday. While Muthoot Finance fell 11% to Rs 128, shares of Manappuram Finance plunged 7% to Rs 30.

The RBI, in its latest efforts, moved to increase transparency for gold loan borrowers so that they are not unfairly penalised for delays.

It asked NBFCs to revise their fair practices code (FPC) norms with prior approval of their boards within a month.

"The NBFCs may ... make suitable amendments in their existing FPC norms and the modified FPC should be put in place by all NBFCs with the approval of their boards within one month," the RBI said in its circular.

The new norms are expected to hit gold finance firms hard.

In 2006, the RBI had issued FPC norms to be adopted by NBFCs while lending. It also covered norms on adequate disclosures on terms and conditions of a loan, and also adopting a non-coercive recovery method.

In a few cases, the RBI said, borrowers at the time of sanction of loans are not fully aware of the terms and conditions of loans including the interest rate, either because the NBFC does not provide details of the same or the borrower has no time to look into detailed agreement.

"As complaints received against NBFCs generally pertain to charging of high interest or penal interest, NBFCs shall mention the penal interest charged for late repayment in bold in the loan agreement," it said.

"We have always been following good practices and fair practices in our business because this is a listed company," said George Alexander Muthoot, MD, Muthoot Finance.