Page 49 - Banking Finance February 2026

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cance that gold loans hold among other personal loan prod- ity of LTV headroom but should also learn about the vitality
ucts. Once considered a sign of a desperate attempt by of clear documentation of the purity and weight of gold,
households, especially old people in families, to secure cash repayment rules, charges, penalties, and most importantly,
in emergencies, now gold loans are mostly availed by people auction rules, so that they remain safe from any unfair treat-
in the age group of 31-40 years (millennials), and with lend- ment.
ers focusing on digital lending and alternatives like loans
against Gold ETFs (as per RBI guidelines) and Sovereign Gold For RBI, the surge in gold prices should be a signal for en-
Bonds, the Gen-Z population is also availing gold loans as a hanced oversight of all involved entities. Along with regu-
means to finance their various needs. With the rise of so- lar guidelines, the central banker can explore the possibil-
cial media, many lenders are promoting these gold loan ity of introducing stress testing for individual banks to pre-
schemes on various social media platforms to educate the pare for any sharp correction in gold prices. In late 2024
present generation about their gold loan offerings. and early 2025, Indian banks experienced a liquidity crunch,
so the RBI can also think about easing provisioning norms
From a lender's perspective, a gold loan is considered one for gold loans, considering the low historical NPA levels and
of the safest among most loan products while deepening strict LTV norms. This could free up capital and would al-
the access of credit, especially for the rural and semi-ur- low the banks to invest in or lend to more projects. The
ban households. However, the growth needs to be balanced recent measures, such as having a cap on individual and
with caution. Lenders should not get swayed away by the group exposures, and setting a limit to the maximum quan-
strong collateral support and should stick to disciplined tity of gold (ornaments / coins) which can be pledged, will
credit appraisals. Even when NPA levels are down and the help in avoiding concentration risk.
recovery rate is strong, borrower income, repayment ca-
pacity, repayment history, and purpose of loans must always In the end, a comprehensive regulatory framework across
remain central to the gold loan underwriting process. all the regulated entities and stakeholders is essential to
address all the concerns and gaps, which have been and
With the recent rise in gold prices, existing gold loan cus- which can still be exploited by any party. A combination of
tomers are rushing to the banks and NBFCs for closure of strict policy discipline, robust practices, and forward-look-
existing loans and applying for new loans, due to the in- ing regulation can help sustain and direct this growth of
creased LTV headroom. Lending institutions need dynamic gold loans to become a reliable financial instrument of li-
monitoring frameworks, which can map gold loans' LTV with quidity and financial inclusion, especially for the rural and
the market prices of gold and can provide trigger alerts semi-urban population of the country.
whenever there is a breach in the LTV ratios. From custom-
ers' point of view, financial literacy is also very important; Reference:
they should not only concentrate on the increased availabil- Various Sources.

The hidden reason losses hurt more than gains feel good

Lose Rs. 1 lakh and it hurts deeply. Gain Rs. 1 lakh—and it barely feels as good.
This imbalance is not imagination; it is psychology. Humans experience losses more intensely than gains of the same
size. In finance, this leads to panic selling, reluctance to book losses, and emotional decision-making.

Markets don’t punish investors because of volatility. They punish investors because of reactions to volatility.
Understanding this bias changes everything. It explains why people exit at market bottoms and hesitate at recover-
ies. It also explains why disciplined investors outperform emotional ones over time.

Good financial advice does not remove losses—it helps investors tolerate them long enough to benefit from recovery.
The real risk is not loss. The real risk is abandoning the plan because of it.

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