NBFC fears banks change their lending stance

After the recent RBI intervention on NBFC’s funding approach, the financial regulator has categorically stated that NBFC must put a stop to gold financing. The recent change in the RBI’s approach has created panic among leading NBFC institutions.

 

Photo by Expect Best

The first step by the RBI has been to put a curb on IILF gold financing. The second step by the RBI has resulted in more curbs to put a stop to securities financing with immediate effect. Both restrictions have left NBFCs in the lurch.

 

The RBI move to curb high-margin financing has led to the belief that banks may no longer be smooth on NBFC lending. There’s now a certain sense of fear lurking among NBFCs. One reason why the RBI decided to take such a move is probably due to the rise in gold financing.

 

According to Financial Express, bank loans against gold jewelry soared to 206% at the end of the third quarter of the current fiscal year. Due to the vertical rise in loans against gold jewelry, the RBI may have taken such extreme measures.