Economy & Banking Current Affairs

Business, Economy and Banking in Current Affairs 2019 with latest news and current affairs in Agriculture, Industry, Banking, Capital Markets, Import and Export and Government schemes in commercial sector.

RBI: Gold loan finance companies can now give loans up to 75% of the market value of the gold

The Reserve Bank of India (RBI) has eased the norms for extending loans against gold jewellery as collateral. It has decided to raise the Loan-To-Value (LTV) cap for loans against the collateral of gold jewellery to 75 % from the present limit of 60% with immediate effect. This means that gold loan companies in India viz. Muthoot Finance, Manappuram Finance, etc can lend up to 75% of the value of gold jewellery deposited with them as guarantee.

The salient features related to RBI’s move to raise Loan-To-Value (LTV):-
  • Only intrinsic value of gold to be used to determine the loan value.
  • Non-Banking Finance Companies (NBFCs) will have to certify on purity of gold, which will be used to determine the maximum permissible loan and the reserve price for auction.
  • The firms can add suitable cautions to protect themselves against disputes on redemption.
  • Mandatory ownership verification to be done in cases where the gold jewellery pledged is more than 20gm, through a suitable document explaining how the ownership was determined.
  • Firms have to conduct auction in the same town or taluk, in which the branch that had extended the loan is located.
  • Disbursement of loans of Rs 1 lakh and above must be done through cheques.

No cash transactions in CIS : SEBI move to check laundering

The market regulator, Securities and Exchange Board of India (SEBI) made it compulsory for all investments into Collective Investment Scheme (CIS) funds to be made through banking channels, and not in cash, to prevent any money laundering activities through such schemes.

As per the regulations of SEBI  
  • Money payable towards subscription of units of CIS shall be paid through cheque or demand draft or through any other banking channel, but not by cash.
  • For launching any such scheme, a person needs to make an application for registration as a Collective Investment Management Company (CIMC) provided that any scheme which is otherwise regulated or prohibited under any other law will not be deemed to be a CIS.
  • The CIMC will enter into an agreement with a depository for dematerialisation of the units of the scheme proposed to be issued. It will follow with Know Your Client guidelines. 

The new norms are known as the Securities and Exchange Board of India (Collective Investment Schemes) (Amendment) Regulations, 2014. These will help to improve transparency in fund-garnering activities through CIS activities and will make it easier to identify the source of funds and real investors involved in such schemes.