Stringent gold loan rules: RBI lax on rich, stifles poor, says Shanmugam
Shanmugam criticised the reduction of the loan cap from 80 per cent to 75 per cent of the gold's value as an act of deception targeting the economically vulnerable.
CPM state secretary P Shanmugam
CHENNAI: CPM state secretary P Shanmugam has strongly condemned the Reserve Bank of India's (RBI) newly issued guidelines for gold loans, describing them as harsh and discriminatory towards the poor and middle classes.
In a statement issued on Friday, Shanmugam said the revised norms, which cap the loan-to-value ratio at 75 per cent, require proof of ownership for pledged gold, and disallow re-pledging unless the prior loan is repaid in full, would make it exceedingly difficult for ordinary people to access credit through public sector banks, co-operative banks, and financial institutions.
"These conditions create a situation where the poor and lower-middle-class families will no longer be able to secure gold loans, a lifeline for many during financial emergencies," he said.
Shanmugam criticised the reduction of the loan cap from 80 per cent to 75 per cent of the gold's value as an act of deception targeting the economically vulnerable. "The requirement of producing purchase receipts for ancestral or heirloom jewellery, often used by multiple generations, is unjust and impractical," he added.
He further warned that the condition barring re-pledging of gold unless a previous loan is cleared in full would drive borrowers into the hands of usurious private lenders. "This move will inevitably lead to the exploitation of rural populations, small traders, farmers, and marginalised communities," he said.
Highlighting the disparity in treatment between large corporates and common borrowers, Shanmugam alleged that banks routinely sanction massive loans to corporate houses against minimal collateral, sometimes as little as 10 per cent, and often write off such loans even in the event of default. "While corporate defaulters are shielded, small borrowers are subjected to ever-tightening restrictions," he said.
Seeking the immediate withdrawal of the RBI's new norms, Shanmugam also urged the Union Ministry of Finance to issue appropriate directions to the RBI to simplify and relax gold loan rules to protect the interests of ordinary citizens.
