New Delhi: Amid spreading coronavirus and subsequent lockdown, borrowers of a gold metal loan (GML) are facing excessive heat as the price of the yellow metal has risen astronomically, triggering margin calls that need to be fulfilled.
The Reserve Bank of India (RBI) has prescribed the tenor of a GML to be of 180 days.
“Contracts that have fallen due during this period or are due immediately after will create a flux in the business as these GML contracts will be forcibly converted by banks to higher interest-bearing working capital limits,” said Ajay Mehra, Managing Director of Mehrasons Jewellers.
While the RBI announcement has mentioned that banks may defer such payments which are due, many banks are choosing not to extend this on the grounds of lack of clarity. “Once again, the spirit of the announcement made by the RBI seems to have been overlooked,” he said.
Borrowers of the GML are facing another problem with the current method of renewing a GML which has been created by the high import duty on gold.
