Gold price crash and RBI intervention on loan companies

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Gold price crash :
The crash in gold prices has turned the spotlight on gold loans firms. The Federal Reserve Bank of Republic of India has moved  into a high-alert mode and will demand info from gold loan firms and provide directions to those with high loan-to-value ratio.
According to sources, there is no immediate crisis as RBIs circular that gold loan firms maintain a most loan-to-value ratio of hr issued in March 2012 will ensure that crash in gold prices doesn’t trigger sale of security by gold loan firms.
Earlier this year,a panel headed by K U B Rao,an advisor to the financial organisation,had recommended that gold loan firms be allowed to provide loans up to seventy fifth of the worth of the loan. Bankers are unsure what stand tally will wrestle the loan-to-value ratio given the fall in prices.
Today Gold price has fallen in record to maintain it’s level at Rs,23700 for 10grams of Gold and trends within the futures exchange indicate that prices may fall more.
If lenders sell gold to correct the loan-to-value ratio this may worsen matters within the native markets.Considering that the LTV is calculated on the principal quantity and interest rates ar terribly high,there is still a default risk for those borrowers whose outstanding is quite the worth of gold, aforesaid a banker.

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