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 Exponential Growth in Gold Loan Porfolio in Banks:  Is it desirable?  COVID and growth in Gold Loans:  The gold loan portfolio of commercial banks in India has grown leaps and bounds in the last three years. The origin of this phase of growth can be traced to COVID lock down days. When jobs and livelihood were threatened, gold at home became the easy option for many to pledge with banks/NBFCs and take cash to meet their daily expenses. With services and manufacturing activities shutdown for quite a long period, the banks, which finance with projection on certainty of repayment or for quick recovery in case of default, looked at gold loans as a 'god send gift'. RBI, in its  endeavour to sustain the economic activities to prevent recession or rein in of inflation, reduced  and kept repo rate to 4.0% close to two years. It also permitted the banks to finance upto 90% of the value of gold (90% LTV as against 75% earlier) in 2021*. Gold loans became cheaper and...

  Withdrawing Rs.2000 Bank Notes:  A Welcome Move Rs.2000 denomination bank note, not in public sight will be officially out of circulation: Reserve Bank of India (RBI) announced on 19 May 2023 that Rs.2000 denomination bank notes, not widely in circulation among public for transactions and with 90% of them been printed six years back, will be withdrawn from circulation in pursuance of its 'Clean Note Policy'. RBI further advised that Rs.2000 bank notes will continue to be a legal tender and the notes can be exchanged for transactions by the public as hitherto. In order to complete the exercise in a time bound manner, RBI requested the public to deposit the said denominated notes with any bank branch or the ROs of RBI (19 in number) either for credit to their bank accounts (no limit) or for exchanging other denominated bank notes in cash (Rs.20000 at a time) Intention: In this regard, though Rs.2000 bank notes continue as legal tender, the following instructions to banks make...

  Recovering NPAs can be interesting (The following episode is based on facts.  Names of the individuals are changed and the name of the bank and the branch are not shared. The intention of the story is to bring home the point that a loan account needs to be followed up  and a banker should never be overawed by the position that the borrower might hold. Not intended in any way  to demean or disrespect any profession in the process including the positions described in the episode. My sincere and unconditional apologies, if the story is perceived by anyone in that way.) Ganesan (G) was posted to a famous Tier 2 city branch of a public sector bank (PSB) X in Tamil Nadu in 2002. Though the NPA crisis of late 1990s moderated by then and the banks started finding viable projects for lending,  the reductions in GNPAs were mainly on account of write offs. The bankers of the day struggled for recovering money from the stressed assets. The challenges in recovery were mult...