The Reserve Bank, in Annual Monetary Policy Statement, has also asked banks to set up internal exposure limits for those non-banking financial companies (NBFCs) who have gold loans portfolio of more than 50 per cent of the total financial assets.
“Banks should reduce their regulatory exposure ceiling in a single NBFC, having gold loans to the extent of 50 per cent or more of its total financial assets, from the existing 10 per cent to 7.5 per cent of bank's capital funds,” RBI Governor D Subbarao said.
He further said that banks should have an internal sub-limit on their aggregate exposure to all such NBFCs.
The Working Group, headed by K U B Rao (a senior RBI official), will conduct a detailed study of the issues connected with rising gold import and loans. The group will submit its report by July-end.
Among other things, it will examine the current practices of NBFCs involved in lending against gold and also whether it is influencing price of precious metal.
RBI, Subbarao said, has been receiving complaints against some NBFCs which are not following the guidelines while giving loans against gold.
Concerned over the spurt in gold imports and loan against precious metal, RBI had earlier tightened the prudential norms to check excessive lending by NBFCs.
India's gold and silver imports during first 11 months of the current fiscal stood at USD 54.5 billion. It had imported gold worth USD 40.5 billion and silver worth USD 1.9 billion in the last fiscal.
RBI's announcement will have implications for NBFCs like Manappuram Finance, Muthoot Finance and Muthoot Fincorp, which are major players in the gold financing sector.
“There are also complaints against some NBFCs that they are not scrupulously following proper documentation process and know your customer (KYC) norms, among others, in order to quickly dispose off the cases relating to gold loans,” RBI said, adding that “gold imports have also increased sharply, raising macroeconomic concerns”.
The Working Group will also analyse the implications of gold imports for external and financial stability, and examine the sources of funds of NBFCs for gold loans.
It will also study the trend and find out whether the excessive loan by NBFCs is influencing gold prices.
Last month, the RBI had directed all NBFCs not to sanction loan beyond 60 per cent of the value of gold jewellery. Experts said the move was to step in and keep a check on gold loans disbursed by any gold loan companies and to regulate interest rates on gold loans and penalties.
Ratings agency Crisil had said that RBI's earlier guideline for the gold loan sector will significantly moderate the growth and profitability of companies.
In the wake of huge gold imports and its impact on balance of payment, Finance Minister Pranab Mukherjee has proposed to increase basic customs duty on standard gold bars, gold coins of purity exceeding 99.5 per cent and platinum from 2 per cent to 4 per cent. Also customs duty on non-standard gold has been hiked to 10 per cent from 5 per cent.
India has around 30 gold mines and the country produces around two tonnes of gold a year, as against the imports of 900 tonnes.