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<div type="image" title="Data from RBI suggests that the outstanding amount on gold loans has swelled from Rs 85,009 crore in September 2022 to Rs 1,47,081 crore in September 2024." msid="115250619" hostid="261" sizebytes="118350" caption="&amp;lt;p&amp;gt;Data from RBI suggests that the outstanding amount on gold loans has swelled from Rs 85,009 crore in September 2022 to Rs 1,47,081 crore in September 2024.&amp;lt;/p&amp;gt;"></div> “Ye le beta, humare khaandani sone ke gehne. Ise girvi rakhva de, shayad kuch paise aa jaye ghar main.” How many times have we seen similar dialogues repeat itself in Bollywood films of the 70s and 80s—abject poverty and a frail-looking old mother pleading to her son to pawn the family’s heirloom <keyword id="18712" type="General" weightage="20" keywordseo="gold" source="Orion">gold</keyword> ornaments to a jeweller, all to get a few bucks? Well, if you’d ask that son in 2024, he’d rather hit the loan button on his <keyword id="19977340" type="General" weightage="20" keywordseo="demat" source="keywords">Demat</keyword> account than pawn his mother’s gold jewellery. Given how Indians are rapidly resorting to taking loans against their investments in shares and mutual funds, these might as well be a cherished family heirloom in today’s time. Fair warning though; it's not as if gold and loans against it are going down in India’s lending scene. It's very much the opposite, shining brighter than ever! The secured loan category is having its time in the spotlight, and people are certainly looking beyond land and property to get their hands on some extra monies! But what is funding the steep rise behind these loans? And are they as failsafe and secure as they’re made out to be? We decode for you in this week’s Simply Put. <h2>The great Indian pawning party</h2>Pawning one’s gold has been, by far, the OG Indian financial move to get a loan. That continues well into 2024, and apparently, more so when India decides to wed and celebrate! Data from <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> suggests that the outstanding amount on gold loans has swelled from Rs 85,009 crore in September 2022 to Rs 1,47,081 crore in September 2024. It looks like Gold took the motto of rise and shine too seriously! Table 1: Growth in gold loans <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Year </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Amount (In Rs crore) </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">September 2022 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">85,009 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">March 2023 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">89,370 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">September 2023 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">97,426 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">March 2024 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1,02,562 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">September 2024 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1,47,081 </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table> Source: RBI data While the world continues to be riled up in multiple geopolitical crises in 2024, gold has been making merry of these tough times. Thus far this year, domestic gold prices have grown by 23%, outperforming benchmark indices like Nifty and Sensex by a mile, which have gone up by 9.85% and 8.86%, respectively. The growth in gold loan disbursal rates month on month this year could also put Nifty and Sensex’s growth to shame. In just September 2024, gold loans grew an astounding 51%, up from 40.9% in August, 30.5% in June, and just 14.8% in March. <h2>Hey, wait up for me, says <keyword id="23953567" type="General" weightage="20" keywordseo="las" source="keywords">LAS</keyword></h2>In lockstep with the elder, gold loan sibling, advances against shares and bonds have also been inching up since 2022. Data from RBI (Reserve Bank of India) notes that as of September 2022, the outstanding quantum of loans that were taken against shares (LAS) and bonds stood at Rs 7,397.94 crores. This inched up to Rs 7,764 crore in September 2023. Come 2024, and it looked like this was LAS’ time to shine. Loans swiftly skyrocketed, with outstanding loans in this category going up from Rs 8,492 crore in March 2022 to a staggering Rs 9,546 crore at the end of September 2024. Naturally, the smoke of LAS has its fire in the record inflows that Indians are pouring into the stock market and mutual funds month on month. Per AMFI (<keyword id="20090034" type="General" weightage="20" keywordseo="association-of-mutual-funds" source="keywords">Association of Mutual Funds</keyword> in India), the net AUM (assets under management) of India’s mutual fund industry grew to Rs 67,25,614.61 crores in October 2024, up from Rs 67,09,259.24 crores in September 2024. Even the number of retail mutual fund folios, which include equity, hybrid, and solution-oriented mutual funds, burgeoned to 17,23,52,296 in October, as compared to 16,81,61,366 in September. The same goes for stock investments in India, where the number of new demat accounts that are added every month just simply refuses to climb down. As of last month, total demat accounts in the country stood at 17.9 crore, which is more than the entire population of full-fledged nations like Japan (12.45 crore), Russia (14.38 crore), and Bangladesh (17.3 crore). In fact, since February this year, the monthly growth of LAS has been hitting double digits. From 11.3% in March to 21.6% in May to 26.8% in August, growth in LAS has been exceptional, hitting 22.9% in September this year. For context, monthly growth in the LAS segment was at a mere 5% in September 2023. <h2>What's driving the growth?</h2>It's a win-win for both the bank and the customer. Customers love them because LAS is available at a lower interest rate compared to unsecured personal loans. You can get a loan at an interest rate of anywhere between 9 and 12% by pledging your gold, MF units, or shares. Compare this to over 10-28% rates, which is the range where unsecured personal loans charge interest. Banks love <keyword id="827883" type="General" weightage="100" keywordseo="secured-loans" source="Orion">secured loans</keyword> since they are well-secured. In case you default on paying back, the bank can sell off your gold, shares, or mutual fund units to recover the amount. This takes a lot of stress off the banks, which are already dealing with secured loans’ riskier sibling-unsecured lending. High NPAs (non-performing assets) and non-payments in the unsecured borrowing space have already put RBI on red alert, which is why the apex bank is tightening the screws on unsecured lending, which was well on its way to becoming a ticking time bomb. As a result, credit growth has moderated to 12.8% YoY in October, as against the 19.3% rise recorded in the year-ago period. Yet it's not like the banks won't feel the heat. Analysts at Nomura note that personal loan delinquencies in India that have been overdue by over 90 days rose to 5.1% in the last financial year, as opposed to just 3.9% in the year prior. <h2>How does it work?</h2>Both these loans work on a similar principle: Your loan amount is equal to a certain percentage of the actual market value of your asset. This is known as the <keyword id="20051485" type="General" weightage="20" keywordseo="ltv" source="keywords">LTV</keyword> (loan-to-value ratio). In the case of gold and debt mutual funds, RBI mandates that this LTV be about 75-80%. So, for every Rs 100 of gold or debt mutual fund unit you pledge, your maximum loan amount cannot exceed Rs 80. If you pledge gold, which has a market value of Rs 10 lakh, you can take a loan of up to Rs 8,00,000. In the case of shares and mutual fund units, this limit is set at 50%. So, your shares worth Rs 5,00,000 can only get you a loan worth Rs 2,50,000. But the bright side? You can continue earning returns on your investments and pay interest only on the amount you use, since this loan works as an overdraft facility. <h2>Super safe, you say?</h2>Interest rates on both of these loans are very much dependent on the market value of the asset, which wildly fluctuates on a day-to-day basis. So, in case the value of your asset falls, you’ll have to keep a margin or more of the same asset in order to continue with the loan and maintain the LTV balance. Failure to do so could mean the bank can even sell off your asset. Says financial planner Nema Chaya Buch. “Yes, LAS offers easy availability of funds since these loans come with a lower interest rate as compared to personal loans. Also, you continue to earn average returns of 10–13% on your equity investments. But the downside is, in case of emergency, those pledged securities cannot be sold. Also, if the equity market goes down, then the bank may ask for additional collateral. Raghvendra Nath, MD, Ladderup Wealth Management notes that taking a LAS is best when the value of your securities has appreciated significantly. “This allows you to maximize the loan amount based on your collateral while also addressing financial needs without having to liquidate your investment portfolio. However, there are notable disadvantages to consider. The market risk is significant; a substantial decline in market value could lead to margin calls, which may incur fees and charges if there are delays or prepayments, ultimately increasing the effective cost of borrowing. Furthermore, failure to make timely payments could result in the loss of your assets.”. Umesh Mohanan, ED &amp; CEO, of Indel Money, cautions that one should have a sufficient quantity of gold to get the loan amount one wants. "According to the current RBI rules, the loan applicant/borrower can draw up to 75% of the total market value of the collateral/gold jewellery. So, always carry a sufficient quantity of gold based on one’s loan requirement. “The most important thing is that the valuation of the gold depends on the purity of the gold. If the borrower pledges gold with higher purity, such as 24 carats or 22 carats, he will get the maximum loan amount," he adds.

Simply Put: Secured Loans 2.0 — why more and more Indians are turning to gold, shares and mutual funds to get loans

The government has waived the requirement for clinical trials of certain categories of drugs in <keyword id="19895063" type="General" weightage="20" keywordseo="India" source="keywords">India</keyword> if they are approved in the <keyword id="19899478" type="General" weightage="20" keywordseo="US" source="keywords">US</keyword>, the <keyword id="19922618" type="General" weightage="20" keywordseo="UK" source="keywords">UK</keyword>, Japan, Australia, Canada and the European Union. The waiver only covers five categories -- orphan drugs for rare diseases, gene and cellular therapy products, <keyword id="22559447" type="General" weightage="20" keywordseo="new-drugs" source="keywords">new drugs</keyword> used in pandemic situations, new drugs used for special defence purposes and new drugs having significant therapeutic advances over the current standard care. This waiver would ensure expeditious availability of the latest medicines for treating diseases like cancers, rare diseases like Spinal Muscular Atrophy (SMA) and Duchenne Muscular Dystrophy (DMA), and autoimmune conditions in India. "As per Rule 101 of New Drugs and Clinical Trials Rules, 2019, the Central Licensing Authority, with the approval of the Central Government, may specify, by an order, the name of the countries, from time to time, for considering waiver of local clinical trial for approval of new drugs under Chapter X and for grant of permission for conduct of clinical trial under Chapter V of the said rules," the Drugs Controller General of India (<keyword id="20559042" type="General" weightage="20" keywordseo="DGCI" source="keywords">DGCI</keyword>) said in an order issued on August 7. "In exercise of the powers conferred under Rule 101 of the said rules with the approval of the Central Government, the countries namely USA, UK, Japan, Australia, Canada and EU are hereby specified for following categories of new drugs," it said. Presently, several medicines already approved by other regulatory authorities in the US, the UK and the EU are not immediately available for Indian patients because of certain regulatory requirements under the Drugs and Cosmetics Act and rules made thereunder. These include the requirement of conducting a local clinical trial and generating safety and efficacy data before marketing authorisation in India, an official explained. However, Rule 101 of the New Drugs and Clinical Trials, 2019, allows the DCGI to specify certain countries for considering waiver of local clinical trials for approval of new drugs. "The advantages of operationalising this rule are that the latest medicines to treat diseases like cancers, rare diseases like SMA and DMA, and autoimmune conditions will become available expeditiously in India. "Presently, the delay in launching a new or novel medicine in India is anywhere between 5-20 years when compared to western markets. With the waiver of Rule 101, the scope of parallel launches of medicines in India along with the West will be opened up," the official explained. Besides, there will be a considerable reduction in the cost of various advanced medicines. Also, there will be a substantial reduction in the public procurement costs of the central and state governments under various schemes like the Central Government Health Scheme (CGHS) and Ayushman Bharat. Another advantage is that the resources which would have gone into approving the Indian clinical trials could now be utilised productively elsewhere, the official said. The costs of conducting local clinical trials will be reduced for pharmaceutical firms, therefore passing on these savings to patients. This is especially true for cases of rare diseases where firms have logistical difficulties in finding participants. The change will promote further research in these areas as there will be access to patient data in the Indian context much earlier, ultimately promoting indigenous innovation and shift from volume to value, the government's mission for the pharmaceutical industry, the official said. 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Govt waives clinical trial requirement for several drugs approved in select countries

The <keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword>'s decision to tighten norms for unsecured <keyword id="35520" type="General" weightage="20" keywordseo="personal-loans" source="Orion">personal loans</keyword> is credit positive because lenders will need to allocate higher capital for such loans, thus improving their loss-absorbing buffers, <keyword id="6462970" type="General" weightage="20" keywordseo="moodys" source="Orion">Moody's</keyword> Investors Service said on Monday. The Reserve Bank last week raised risk weights on unsecured retail loans, credit cards and lending to non-banking finance companies (NBFCs) by 25 percentage points. Moody's said <keyword id="586043" type="General" weightage="20" keywordseo="unsecured-loans" source="Orion">unsecured loans</keyword> have been growing rapidly in the past few years, exposing financial institutions to a potential spike in credit costs in case of sudden economic or interest rate shocks. "The tightening of underwriting norms through higher risk-weighted assets is credit positive because lenders will need to allocate higher capitals for such loans improving their loss-absorbing buffers and may dampen their growth appetite," Moody's said in a statement. It said that over the past few years, India's unsecured lending segment has become very competitive, with banks, NBFCs and financial technology (fintech) companies, including several new entrants, aggressively growing loans in this category. In the past two years, personal loans grew around 24 per cent and credit card loans rose 28 per cent on an average compared with the overall banking sector's credit growth of around 15 per cent, Moody's said. "We expect banks would be able to absorb higher risk weights on their capital because the overall banking sector's exposure to unsecured retail credit is small at around 10 per cent of loans as of September 2023 and the sector's overall capitalization is at historically high levels with a Common Equity Tier 1 ratio of 13.9 per cent as of March 2023," Moody's said. However, the impact of the new underwriting rules could vary among individual lenders depending on their exposure to unsecured loans, it added. Last week, US-based S&amp;P Global Ratings had said that the RBI's decision to tighten norms for unsecured consumer credit is likely to hit banks' capital adequacy by 60 basis points. The move could lead to higher lending rates, lower credit growth and increase the need for capital raising among weak lenders, it added.

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Simply Put: Secured Loans 2.0 — why more and more Indians are turning to gold, shares and mutual funds to get loans

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Govt waives clinical trial requirement for several drugs approved in select countries

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Higher risk weight on unsecured bank loans credit positive: Moody's

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