Gold Price Fall Not Much Worry for NBFCs, But Banks Need to be Watchful, Warns CRISIL Moneylife Digital Team 0 The correction in gold prices in recent months is not expected to materially impact the asset quality of non-banking financial companies (NBFCs) lending against gold. While NBFCs have maintained disbursement loan-to-value (LTV) below 75%, banks have higher incremental-disbursement LTV at 78-82%, and thus needs to be more watchful and focus on timely collection of interest and follow LTV discipline, warns a research report.
In the report, ratings agency CRISIL says, "Disbursement LTV and timely interest collection have a significant bearing on the cushion available with lenders (see table below) in terms of value of gold given as collateral compared with the loan outstanding. This, in turn, impacts asset quality. Therefore, robust risk management systems and timely auctions are crucial to offset volatility in gold prices and ultimate credit loss."