<p> The Association of Gold Loan Companies (AGLOC) on Monday said that falling gold prices won’t have any “significant impact” on their loan portfolios as their business model takes care of price fluctuations.<br /><br /></p>.<p>It said that the member companies have already factored in fluctuations in their business model and as such a 15-20 per cent price fluctuation in gold prices will not impact their gold loan portfolios.<br /><br /> It said that though price is an important factor in gold loan business, the business model should not be misunderstood as a business of financing of gold bullion or shares where in mark-to-market valuation could affect the repayment behaviour of the borrower.<br /><br /> In a statement, ALFOC president George Alexander Muthoot said: “The gold loan companies are majorly lending against household jewellery where the impact of such temporary fluctuations on the business model are minimum. These loans are of short duration of 3-6 months. Compared to the disbursements, NPA levels are low.”<br /><br />He further said, “AGLOC has asked member companies to review their existing collection mechanism and further strengthen it. Companies should auction defaulted and abandoned loan accounts with due compliance to fair practice code stipulated by the RBI.”<br /><br />AGLOC said that the maximum lending rate has been reduced in the light of fall in gold prices and added it is closely monitoring price movements to advise members of any further change in the maximum rate of loan per gram of gold.<br /></p>
<p> The Association of Gold Loan Companies (AGLOC) on Monday said that falling gold prices won’t have any “significant impact” on their loan portfolios as their business model takes care of price fluctuations.<br /><br /></p>.<p>It said that the member companies have already factored in fluctuations in their business model and as such a 15-20 per cent price fluctuation in gold prices will not impact their gold loan portfolios.<br /><br /> It said that though price is an important factor in gold loan business, the business model should not be misunderstood as a business of financing of gold bullion or shares where in mark-to-market valuation could affect the repayment behaviour of the borrower.<br /><br /> In a statement, ALFOC president George Alexander Muthoot said: “The gold loan companies are majorly lending against household jewellery where the impact of such temporary fluctuations on the business model are minimum. These loans are of short duration of 3-6 months. Compared to the disbursements, NPA levels are low.”<br /><br />He further said, “AGLOC has asked member companies to review their existing collection mechanism and further strengthen it. Companies should auction defaulted and abandoned loan accounts with due compliance to fair practice code stipulated by the RBI.”<br /><br />AGLOC said that the maximum lending rate has been reduced in the light of fall in gold prices and added it is closely monitoring price movements to advise members of any further change in the maximum rate of loan per gram of gold.<br /></p>
