Mubina Kapasi of ET Now welcomes Mr Raj Khosla, Founder & Managing Director, MyMoneyMantra on The Money Show this week. Here are the excerpts from the interview.
Ms Kapasi: Today we will be talking about 2 big news pieces from the week. Firstly, Co-operative banks are brought under RBI’s supervision. What does it mean for customers? It is interesting to know when a lot of Corporative banks are facing a lot of trouble. PMC bank is fresh in the mind. The depositors of PMC can withdraw limited amount from past 1 year. Can RBI lend more confidence to the depositor with respect to the safety of the money?
Further in the show we will also talk about Gold Loans. From last 2 days we have seen rally in gold prices. Does it mean Gold Loans are more attractive now? Should a Loan against gold be your chosen product if you need cash.
Let’s introduce our guest Mr Raj Khosla to talk about these developments this week.
Q. First let’s talk about this entire news around corporative banks. What does this extra supervision by RBI mean, especially for the customers?
Mr Raj Khosla: Yes. For the customers RBI’s supervision of Coop Banks makes banking much safer and much more organised. It brings in transparency and standardisation in their operating procedures. Corporative Banks will now be subject to same amount of discipline that all other schedule banks practice. That is pretty much the best practices that RBI mandates for governance of banks, and it will be applied to the Corporative Banks and that is the good news for the customers.
There will be no hidden charges. They cannot step out of RBI’s mandate.
Q. What happens if a corporative bank is not able to honour cash & there is an asset liability mismatch?
Mr Raj Khosla: In such a situation, the same rule applies which applies to other bank customers. The cover by Deposit Insurance and Credit Guarantee Corporation will be there to protect the customers’ money. Corporative Banks will be much better safeguarded under RBI.
Q. How will RBI’s supervision manage mismanagement by Coop Banks? Can it be prevented?
Mr Raj Khosla: Well, these banks will offer rates, in the band recommended by RBI. Essentially whether they accept money or make investment, it will be governed by RBI’s guidelines and not by their own preferences. Therefore, RBI’s supervision will ensure only good news for depositors and bank customers.
In a way, this will also improve digitisation. RBI will require Coop Banks to report frequently and with regularised reporting it will certainly improve digitisation within the bank and for customers all along.
Alright!, now let’s switch the gears and talk about rally in GOLD price.
Q. Does it make Gold Loans more attractive than any other kinds of loan facilities that banks or NBFC are offering today?
Mr Raj Khosla: Whether a loan is attractive or not depends more on the rate of interest as opposed to security offered. If the price of the gold is going up, the value you get as LTV goes up. But does that make it more attractive? The attractiveness of a loan depends a lot on the rate of interest.
The rate of interest for Gold Loan is not the cheapest in the industry. Yes, if price of Gold goes up, u will get more money for same gold.
Do not forget Gold Loan is also an emotional decision. So, frequently you will find that Indian households prefer to opt for more expensive option that parting away with gold.
Q. With Gold Loans, disbursal is very fast. The lenders are marketing disbursals in 30 minutes. In this COVID crunch, when every household in India has Gold, will it be more beneficial to opt for Golf Loan than a Personal Loan or Overdraft?
Mr Raj Khosla: Gold is required to be deposited with the lender and thus the speed will not be as quick as marketed. The fastest would be to access funds against a Fixed Deposit. Yes, Loan against FD is almost instantaneous.
If you have a running Home Loan, and you choose to do bank transfer, it will be faster along the Top Up. It is much cheaper source of fund. Likewise, loan against FD is 50 or 100 bps above the rate you were earning. So these are cheaper sources.
The used car loan is another option you should look at. It will not disrupt your life as in case where you pledge your fixed asset like FD or Gold. The Used Car Loan will come in the range of 15% but it doesn’t disrupt your life in any way. In case you want to repay loan in a matter of 3-4 months, it doesn’t matter if you serving a higher rate of interest as far as it is not disrupting your life.
For longer term, I recommend Home Loan Top UP or Loan against Property as it available in the range of 9.5-10.5 %. It is still the least disruptive as you are living in your home & you have your gold too.
Q. What do you think is ease of availing Gold Loan vs other kinds of loan? Do you think it is less cumbersome than other loans and has low documentation requirement?
Mr Raj Khosla: Personal Loan or any other unsecured loan is going tougher due to Moratorium. Banks do not have any other way to assess creditworthiness if you are already serving an EMI deferment. To ensure good quality of credit, secured loans are their way out. It is easier to qualify for a Gold Loan under these circumstances.
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