RBI set to ask lenders to tighten gold loan processes

MUMBAI/NEW DELHI, Mar 07 (Reuters): India's central bank plans to ask lenders to follow stricter underwriting processes for gold loans and monitor the end-use of funds as it tries to cool growth in the fast-growing segment, seven people, including industry sources and those aware of the regulator's thinking, said.

The Reserve Bank of India (RBI) wants banks and non-banks to also bolster background checks on borrowers and ascertain the ownership of the gold that is being mortgaged, according to the sources, who did not want to be identified as they are not allowed to speak to the media.

"The RBI wants to ensure that the entities are following a standard protocol and any growth in the gold loan sector is not out of bounds," one of the sources aware of the central bank's thinking, said.

"It wants to make sure that any unethical business practices are curbed and financial stability is protected."