There are many positive impacts that gold loans have had on the economic environment with low-interest rates, an increase in the amount of money at the borrower's disposal, and an increase in the investment level of the economy being among the select few benefits. Gold Loans have thus assumed the role of being one of the principal components of regulating credit in the market and has been beneficial for the growth of the credit environment. However, there are a few major areas where the gold loan eligibility could work so that the outcome would come as better prospects can prevail in the future and more people would be inclined to reach out for gold loans from private commercial banking institutions.
Following are some of the areas where work is necessary so that the gold loans have a foundation to work on and regulate the investment pattern-
Changing the system of Collateral Loss on Default of Payment- The first area where the banking institutions need to twerk their policies and work on is changing the system of Collateral Securities when there is the default in payment by the borrowers. Before we point out the problems in this system we will clear out our conception about collateral securities. Collateral securities refer to the liquid assets which are deposited by the borrower to the banking institution on whose exchange amount the loan is availed by the borrower. These collateral securities are generally categorized into gold jewellery and ornaments. The problem starts when the borrower is unable to pay the installment amount of the loan taken for a particular month. When there is a default in payment of interest by the borrower, the banking institutions after sending a requisite notice would keep a hold on the number of collateral security deposits and they would not allow the borrowers to take it back.
This system leads to large-scale asset loss for the borrower as they would not be able to retrieve the asset which was deposited by them. The banks here could work how the pay of SBI gold loan interest rate could be improved this system so that more time is provided to the borrower before the drastic step in this regard is taken.
Increasing the outreach of the loan facilities- The second area where the banking institutions can work on is increasing the outreach and the popularity of the gold loan facilities. At times it happens that the consumers do not have any idea that the banking institutions are providing loan facilities to the borrower. Since they are used to taking gold loans they at times misspell the information provided on the guidelines and the terms and conditions mentioned in the contractual agreement signed while availing the loan facility.
This ignoring the information may lead to the arousal of a clause that might be unknown to the borrower and thus they would be unable to process the loan in a better manner. This would lead to gestation or a lag in the loan facilities discouraging the borrowers to take any more loans from the banking institutions. These areas must be addressed as soon as possible to work out a feasible solution and therefore increase the productivity of gold loans. Thus the banks must work on their outreach policies so that they can communicate with their designated borrowers in a better manner and this would lead to a significant rise in the growth of the gold loan facilities that prevail in the market environment.
Conclusion: Overcoming challenges and emerging triumphant should be the goal of society. That is exactly what the banking institutions must do so that productive results can be generated and a better investment environment can be created.
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