Regulatory Challenges and Market Dynamics

The gold loan market, which has expanded significantly, faces heightened scrutiny due to risky lending behaviors encouraged by competition and irregular practices. With the RBI's temporary raising of the loan-to-value (LTV) ratio to support borrowers during financial hardships, lenders took advantage of this by continuing to operate at higher LTV rates even after the grace period. This has led to situations where borrowers may owe more than the actual value of their collateral, increasing defaults. As the RBI steps in to monitor and enforce regulations, questions remain about whether lenders will prioritize ethical conduct in the face of competitive pressures.