Business

This is an AI generated image (left) and Gautam Adani (Right)

NEW DELHI: Gautam Adani, Asia’s second-richest person, said the Adani Group stayed strong and adapted its strategy despite facing a series of acquisitions and intense scrutiny, becoming stronger and more resilient.“In the face of fierce headwinds and relentless scrutiny – we have never retreated. Instead – we have recalibrated. We have reimagined. And we have become – more formidable, more unbreakable, more stronger and more resilient!” Adani said in the recent annual report of Adani Enterprises.He also announced that the conglomerate plans to invest $15–20 billion over the next five years across its businesses, backed by a strong balance sheet and steady growth.Adani noted that people often ask him “How does Adani Group keep doing it? How do we rise, time and again?”“My answer remains the same: Our conviction is anchored in clarity. Our objectives are aligned with India’s ambitions. And our strength comes from the belief that you – our shareholders – place in us,” he said.In January 2023, a report by US short-seller Hindenburg Research accused the Adani group of being “the largest con in corporate history,” causing stock prices to crash and wiping out over $150 billion in market value. The group’s largest public offering was also called off.Adani Group reduced debt, cut back on pledged promoter shares, attracted new investments, and refocused on its core businesses.Just as it began to recover, the group faced fresh allegations from US authorities, accusing it of bribery to win Indian power contracts and misleading investors, during fund raises.Adani Group denied all wrongdoing and said the group had faced challenges before and would face them again. Despite the setbacks, most Adani stocks have rebounded, and the group has reported record earnings.Regarding the US Department of Justice and SEC allegations concerning Adani Green Energy, he asserted that this wasn’t their first challenge.“Nor will it be the last,” he continued.“Every challenge sharpens our resolve. Every setback becomes a stepping stone,” he stated, emphasising that no member of Adani Group faces charges of violating Foreign Corrupt Practices Act (FCPA) or conspiring to obstruct justice.“We live in a world where negativity often echoes louder than truth. But as we cooperate with legal processes, let me also restate – emphatically – our governance is of global standards, and our compliance frameworks are robust and non-negotiable,” Adani further added.The conglomerate’s diverse portfolio spanning ports, airports, renewable energy, data centres, defence manufacturing, and city gas distribution has demonstrated substantial expansion in recent years.“History should remember us not for the size of our balance sheet, but for the strength of our backbone. Not just for the markets we entered, but for the storms we handled and emerged stronger. For it is easy to lead in sunshine, but true leadership is forged in the face of crisis,” he said.Adani also highlighted record profits across the group’s ports-to-energy businesses for the financial year 2024–25. He further said that the Adani Airports handled a record 94 million passengers, and the Navi Mumbai Airport is set to open later this year with an initial capacity of 20 million passengers, eventually expanding to 90 million.Adani Defence is developing ammunition and missile systems in Kanpur, and its surveillance and Kamikaze drones played a role in the recent Operation Sindoor, he added.

NEW DELHI: IndiGo airlines plans to increase its air services in Assam following a recent discussion with chief minister Himanta Biswa Sarma, according to an official statement released on Sunday.“The significant decision made by IndiGo management to introduce new flights and with stopovers of existing flights at new locations in Assam has been conveyed to the Assam chief minister on Sunday,” the release said.The state’s air connectivity is set to improve further with this expansion of flight services to and from the region.The announcement follows a meeting held on May 22 in New Delhi at the chief minister’s official residence, where he met with IndiGo’s senior management and the Civil Aviation Secretary.During the talks, Sarma urged the IndiGo senior officials to improve air connectivity to essential locations across Assam, specifically Silchar, Dibrugarh and North Lakhimpur.In response, IndiGo management confirmed a direct flight between Delhi and Jorhat beginning mid-September 2025. Additionally, they announced a new Guwahati-Navi Mumbai route starting winter this year.The airline confirmed that the Delhi-Dibrugarh service will now stop at Guwahati, establishing morning connections between Assam’s two capitals. They also revealed plans to introduce a morning Guwahati-Silchar service and assess regular operations from Lilabari Airport in North Lakhimpur.Sarma later posted on X: “During my recent meeting with the @IndiGo6E leadership in New Delhi, I urged them to enhance air connectivity to other key locations across Assam — particularly Silchar, Dibrugarh, and North Lakhimpur.“I’m pleased to share that IndiGo has responded positively and shared the following upcoming deployments: The Delhi-Dibrugarh flight will now include a stopover at Guwahati, providing morning connectivity between the two capitals of Assam,” the post added.IndiGo will adjust its timetable to establish a morning Guwahati-Silchar flight, addressing passenger requirements. A Guwahati-Navi Mumbai service will begin from Winter 2025-26. The airline will evaluate scheduled flights from Lilabari Airport in North Lakhimpur.“It was a pleasure to meet the leadership of @IndiGo6E in New Delhi to discuss their roadmap for expanding air connectivity in Assam. I appreciate IndiGo’s prompt response and look forward to their continued efforts in delivering quality service to the people of our state,” the post further added.

LONDON: Britain will invest £1.5 billion ($2 billion) in new weapons factories to ramp up defence production capacity, the government said on Saturday, ahead of a major review of its armed forces and military strategy.The Strategic Defence Review, due to be published Monday, will assess the threats facing the UK amid Russia’s ongoing war in Ukraine and pressure from US President Donald Trump for NATO allies to bolster their own defences.In February, UK Prime Minister Keir Starmer committed to increasing defence spending to 2.5 percent of GDP by 2027, up from its current 2.3 percent.The Labour leader also aimed to hike spending to three percent by the next parliament, due around 2029. The review will recommend “creating an ‘always on’ munitions production capacity in the UK” which would allow weapons production to be “scaled up at speed if needed”.It also urges the government to “lay the industrial foundations for an uplift in munitions stockpiles to meet the demand of high-tempo warfare”, the Ministry of Defence said in a statement.The government has said it would procure 7,000 domestically built long-rang weapons and build “at least six munitions and energetics factories”.This investment — which will see £6 billion spent on munitions this Parliamentary term — will also create and support 1,800 jobs, the ministry said.“The hard-fought lessons from Putin’s illegal invasion of Ukraine show a military is only as strong as the industry that stands behind them,” Defence Secretary John Healey said.“We are strengthening the UK’s industrial base to better deter our adversaries and make the UK secure at home and strong abroad.”Healey also told The Times newspaper that Britain would spend three percent of GDP on defence during the next parliament.The government has said it would cut the UK’s overseas aid budget to help fund the spending.The defence review, led by former NATO secretary general George Robertson, warns that Britain is entering “a new era of threat” as drones and artificial intelligence transform modern warfare, The Guardian newspaper reported Saturday.The document will warn of the “immediate and pressing” danger posed by Russia, as well as focusing on China, Iran and North Korea.Robertson has described the four countries as a “deadly quartet” which were “increasingly working together”.The government this week pledged over £1 billion for improving battlefield technology by bolstering AI and cybersecurity.In that announcement Healey warned that “ways of warfare are rapidly changing” and that the UK was “facing daily cyber-attacks on this new frontline”.mhc-aks/srg/rmb

NEW DELHI: Despite a muted trend in the equity market, four of the top 10 most valued Indian companies added a combined Rs 1,01,369.5 crore to their market valuation last week, with Life Insurance Corporation of India (LIC) emerging as the top gainer. The BSE benchmark, however, slipped by 270.07 points or 0.33% during the same period. HDFC Bank, Bharti Airtel, State Bank of India and LIC witnessed gains in market valuation,LIC’s market valuation increased significantly by Rs 59,233.61 crore to Rs 6,03,120.16 crore, marking the highest gain among the top-10 companies.State Bank of India’s valuation grew by Rs 19,589.54 crore to Rs 7,25,036.13 crore.Bharti Airtel’s market capitalisation (mcap) increased by Rs 14,084.2 crore to Rs 10,58,766.92 crore, while HDFC Bank’s value rose by Rs 8,462.15 crore to Rs 14,89,185.62 crore.In contrast, six other firms – Reliance Industries Ltd, Tata Consultancy Services (TCS), ICICI Bank, Infosys, Bajaj Finance and Hindustan Unilever Ltd – experienced a collective decrease of Rs 34,852.35 crore.TCS, however, saw its mcap reduced by Rs 17,909.53 crore to Rs 12,53,486.42 crore.Bajaj Finance’s mcap reduced by Rs 4,061.05 crore to Rs 5,70,146.49 crore, and ICICI Bank’s value fell by Rs 2,605.81 crore to Rs 10,31,262.20 crore.Hindustan Unilever Ltd’s valuation decreased by Rs 1,973.66 crore to Rs 5,52,001.22 crore, while Infosys experienced a reduction of Rs 656.45 crore to Rs 6,49,220.46 crore.Reliance Industries’ valuation decreased by Rs 7,645.85 crore to Rs 19,22,693.71 crore.Reliance Industries however held its position as the most valued company, followed by HDFC Bank, TCS, Bharti Airtel, ICICI Bank, SBI, Infosys, LIC, Bajaj Finance, and Hindustan Unilever.

The annual quota for EB-5 vias is restricted, with India allocated roughly 700 visas. (AI image)

US President Donald Trump’s mounting restrictions on student visas, has many Indians presently in the US and prospective college applicants considering the EB-5 visa route. This visa scheme offers a route to permanent residency or Green Card for foreign investors who contribute $800,000 (approximately Rs 7 crore).International students at prestigious global universities are increasingly finding themselves caught in political and administrative conflicts, according to experts. Previously, status adjustments enabled students to remain in the US whilst obtaining work and travel permissions.Immigration lawyers have witnessed a doubling of EB-5 applications from Indian students during the last four to five months of Donald Trump’s second presidential term.The current US administration’s less welcoming stance towards international students has prompted those aged 19-24, particularly in sought-after disciplines such as computer science, biotech and finance, to increasingly pursue EB-5 visas.

EB-5 visa demand

The annual quota for this category is restricted, with India allocated roughly 700 visas. Given that the US remains the preferred destination for higher education, with 86,000 Indians enrolled in 2024, experts anticipate intense competition for EB-5 visas this year.“There is a sharp jump in EB-5 applications,” Rajneesh Pathak, founder of Global North Residency and Citizenship, an immigration law firm, told ET. “But unlike previous years, when we had most-ly H-1B visa holders applying, the interest from F-1 visa holders has risen by 100% over the last few months.”Also Read | ‘Went COLD TURKEY, it was devastating for them…’: Donald Trump slams China for ‘violating’ trade agreement with US – what went wrong this time?The non-immigrant F-1 visa permits international students to enter and remain in the US for full-time academic studies, offering limited work permissions.According to experts, parents are exercising extra caution given the current US political climate. “They are willing to invest in EB-5 to secure the future of their children,” said Pathak.Recent developments contributing to widespread concern include the suspension of new F-1 visa appointments, conflict between the Trump administration and Harvard University, stricter F-1 visa regulations, intensive review of students’ documentation including social media activity, SEVIS system technical issues, and enhanced scrutiny at entry points.“The F-1 visa, once as a bridge to opportunity, now feels like a tightrope,” said Akshat Gupta, head of India & UAE, US Immigration Fund (USIF), an EB-5 Regional Centre operator.Since January, USIF has witnessed a 100% increase in F-1 visa holders applying for EB-5 visas compared to 2024.US legal practice Chugh LLP reports a significant increase in EB-5 applications from Indian students holding F-1 visas.Also Read | ‘Sergey Brins of the world came as students..’: Raghuram Rajan warns about risks to US economy if foreign students are curbed by Trump“Roughly one-third of my new immigration consultations now involve students worried about how US politics could affect their status,” said Navneet S Chugh, attorney, who runs the firm. The firm’s EB-5 enquiries from students have risen from one or two quarterly last year to five to seven monthly this spring.“The Harvard dispute simply reminds them how quickly rules can change,” said another lawyer.Davies and Associates, a US-based immigration law firm, reports substantial enquiries from Indian students and H-1B visa holders interested in pursuing the EB-5 visa pathway.The processing duration for I-526E applications has reduced considerably compared to previous periods.“In some instances, what once took three years is now being processed in as little as three months,” said its founder and chairman, Mark Davies. He noted that applicants maintain the freedom to reside and work in the US whilst their Green Card applications are under review.According to Sukanya Raman, country head at Davies and Associates, Green Card holders receive legal safeguards unavailable to F-1 visa students. “We are advising students to maximise their time within the US and avoid unnecessary foreign travel or extended breaks,” she told the financial daily.Also Read | Remittances tax: How Donald Trump’s ‘The One Big Beautiful Bill’ may turn out to be ugly for Indians in the US

NEW DELHI: India is set to witness a sharp rise in demand for Artificial Intelligence (AI) professionals, with reports projecting a need for one million skilled workers by 2026.As the nation aims to become a $23–35 trillion economy by 2047, higher education—especially in engineering—is being reshaped to keep pace with the fast-changing job market driven by AI, automation, and innovation across disciplines, as detailed in the report ‘India’s AI Revolution: A Roadmap to Viksit Bharat’, issued by the Union Ministry of Electronics & IT.Engineering is at the center of this shift. According to the All-India Council for Technical Education (AICTE), the number of approved B.Tech seats for 2024–25 has increased to 14.9 lakh, a 16% rise over the past four years. This growth is mainly due to a surge of over 50% in seats for Computer Science and related fields like AI/ML, Data Science, Cybersecurity, Cloud Computing, and Blockchain, reflecting strong demand from industry.India’s technical education sector is adopting cross-disciplinary and industry-integrated approaches to develop engineers proficient in coding, creation, collaboration and innovation leadership. The evolution from STEM to STEAM, incorporating Arts, is becoming prevalent, combining technical expertise with design thinking, communication, psychology, law and business principles.The India Skills Report 2024 by Wheebox predicts the country’s AI industry will reach $28.8 billion by 2025, growing at 45 per cent CAGR. The report indicates that AI-skilled professionals have increased 14-fold from 2016 to 2023, positioning India amongst the top five rapidly growing AI talent centres, alongside Singapore, Finland, Ireland, and Canada.“The surge in demand for AI professionals’ stems from rapid technological progress. As AI reshapes productivity, operations, and innovation, preparing a future-ready workforce is imperative. At SRM Institute of Science and Technology, we offer interdisciplinary programs in areas like Medical Engineering, ECE with Data science, Biotechnology (Food Technology) and AI-ML Embedded Systems to bridge emerging domains. Our strong academia-industry partnerships provide students with real-world exposure and global competitiveness,” Dr Kathiravan Kannan, Director, SRM Group of Institutions, Ramapuram, Chennai and Tiruchirappalli told news agency ANI.

Representative image (Picture credit: AP)

NEW DELHI: Doubling of import duty on steel and aluminium by the Trump administration will dent export demand, with companies having to scout for alternative markets.Several US importers have gone slow on fresh orders as costs went up significantly after the imposition of 25 per cent duty, although India was not seen to be worse off, given that the same duty applies to all countries. But if Trump decides to move ahead with his threat, several American firms will have to slow down production as such duties are seen to be unviable and unsustainable. This will also reduce demand for inputs.“The economic impact will be significant. US steel prices are already high, at around $984 per metric tonne – far above European prices at $690 and Chinese prices at $392. The doubling of tariffs is expected to push US prices to about $1,180, squeezing US domestic industries such as automotive, construction, and manufacturing that depend on steel and aluminium as key inputs. These sectors may face hundreds of dollars in additional material costs per tonne, driving up prices, reducing competitiveness, and risking job losses or inflationary pressures,” said trade research body GTRI.Fieo chief S C Ralhan said the increase in tariffs would have a significant bearing on India’s steel exports, especially in semi-finished and finished categories like stainless steel pipes, structural steel components, and automotive steel parts. These products are part of India’s growing engineering exports, and higher duties could erode our price competitiveness in the US market.EEPC India president Pankaj Chadha said, “It’s unfortunate that while bilateral trade talks are going on between India and the US, such unilateral tariff increases have be done. It only makes the work of negotiators more complicated.” Last fiscal, India exported steel and finished products of $6.2 billion to the US and about $0.9 billion of aluminium and its products. The US is among the top destinations for Indian exporters, who have been increasing market share through high-quality production and competitive pricing, Fieo said.

The story so far: After the Pahalgam terror attack on April 22, India initiated a series of measures against Pakistan that included the suspension of the Indus Waters Treaty. In response to India’s calibrated steps, Pakistan issued a NOTAM (notice to airmen), closing its airspace to Indian aircraft from April 24 to May 23 — multiple air traffic routes were unavailable across the north and south as well as a part of the Arabian Sea. India responded with a similar NOTAM on April 30, that was effective till May 23.

Also Read | India extends airspace ban for Pakistan airlines till June 23

What happened after the hostilities?

After India’s tri-service Operation Sindoor (May 7-10), Pakistan opened its airspace resulting in some foreign airlines resuming overflights. However, both countries have again issued fresh notices, closing their airspace to Indian (“till June 24, 4.59 a.m., Pakistan Airports Authority”) and Pakistan aircraft (June 23), respectively.

Is there a history of airspace closure?

Prof. Mohammad Owais Farooqui, Assistant Professor of Aerospace Law, Department of Public Law, College of Law, University of Sharjah, has told The Hindu that in the 1950s, India had objected to Pakistan’s declaration of a “prohibited zone” along its frontier as discriminatory as it allowed overflights by other nations. The dispute was resolved diplomatically but set a precedent that such restrictions must have bona fide security justifications.

The Hindu’s archives show that airspace closure has been a major issue corresponding with the state of bilateral ties. Following the 1965 India-Pakistan war, a report, “Overflights from Feb. 10: Indo-Pak. Accord: Air Services to be Resumed From March 1” (The Hindu, February 8, 1966), highlighted “an in principle agreement to allow overflights and a resumption of normal Pakistani and Indian services from March 1”. Pakistan also wanted a direct link to Dacca (Dhaka), which was cut off in the war in September. The report said that “to reach East Pakistan from the west wing, Pakistan aircraft at present have to fly by Ceylon, a detour of more than 2,000 miles and that international flights have been forced to operate from Karachi to Bombay — across the Arabian Sea (connections to New Delhi are picked up from Bombay)”.

In 1971, there was another ban following the hijacking of an Indian Airlines Fokker F-27 flight (Srinagar-Jammu) on January 30 to Pakistan. The passengers were released in Lahore and the plane was destroyed (burnt). A report, “Pak. Civil Overflights Also Banned” (February 4, 1971), detailed India’s banning of civilian overflights as well as continuing an existing ban on military aircraft until “Pakistan had satisfactorily settled the question of compensation for the Indian aircraft”. The report said that flights in both countries were affected (Pakistan “much more than India”). This incident also saw India filing a case in the World Court after Pakistan lodged a complaint with the International Civil Aviation Organization (ICAO) and the United Nations Security Council against the overflight ban. The World Court ruled (14-2 vote) that ICAO had jurisdiction over the issue. The issue was resolved in June 1976, with India and Pakistan signing a memorandum of understanding on resumption of overflights and flights.

Since then, there have been other closures and normalisations, with major events being the Kargil war (1999), the Indian Parliament attack (2001) and the Balakot airstrikes (2019).

Also Read | Brace for longer flights to the Gulf, Europe and the U.S. as Pakistan shuts its airspace

Is there an estimate of the losses?

In 2002, India’s Ministry of Civil Aviation was to seek budgetary support for Indian airlines after estimates of losses (Air India ₹40 crore a year; Indian Airlines ₹3.4 crore and the Airports Authority of India ₹5 crore from landing and parking charges and also overflights). Pakistan’s losses were estimated to be five times more, according to the Minister of Civil Aviation.

In 2019, the collective losses of Indian carriers were put at ₹548.93 crore (Rajya Sabha reply). A PTI report said Pakistan had suffered a $50 million loss. According to IATA, before the ban, at least 220 flights used Pakistan’s airspace to operate between Asia and Europe.

In 2025, the consolidated loss for the Indian aviation sector (including cargo) may be around ₹7,000 crore (indicative figure), according to reports that cite industry sources. Data reports based on the 2019 closure show that Pakistan lost approximately $2,32,000 every day in overflight charges and $3,00,000, if landing, parking and navigation fees were added.

What were the airspace changes in 2025?

There was a temporary closure of 32 airports across northern and western India. There was also a temporary closure of 25 segments of Air Traffic Service (ATS) routes within the Delhi and Mumbai Flight Information Regions (FIRs), “unavailable from ground level to unlimited altitude” for aviation safety. Overflights were “funnelled” along certain air routes, with Mumbai, Ahmedabad, Nagpur, Kolkata and Chennai air traffic control managing the traffic. In 2019, as many as 500 flights were rerouted overnight. On May 7, during Operation Sindoor, there were close to 500 aircraft (20% were Indian aircraft) movements from Indian airspace to Pakistan, aviation sources have told The Hindu. Some of the air routes used included N571, P574, L301, L505 and L639, in turn linked to flight management with the Muscat FIR. There was also a 30% increase in aircraft movement per hour, with peak hour traffic put at 40 aircraft. In air navigation terms, India and Pakistan share close to 12 waypoints, through which the Mumbai and Delhi FIRs feed air traffic, while there are six waypoints between the Mumbai and Muscat FIRs. The sources said that the traffic load from the 12 waypoints was shifted to these six waypoints. Established air traffic management procedures were used such as minimum aircraft separation standards (vertical, crossing and lateral for east and west-bound traffic).

Flightradar24’s director of communications has told The Hindu that there are few alternative routes via China due to the regimented nature of Chinese airspace and the presence of high mountains which can impact safe flight operations. Any routing that is less than optimal would add time and cost, he said.

Will international aviation law hold?

Prof. Farooqui says that while international aviation law provides mechanisms for redress, their effectiveness depends on political will and an understanding of the nuanced facts of this bilateral standoff.

The story so far:On April 9, the Reserve Bank of India (RBI) released draft directions on loans against gold collateral with the objective to harmonise the regulatory framework across regulated entities (banks and Non-Banking Financial Companies (NBFC)) and address differences in lending practices.

What was the response to the proposals?

Tamil Nadu Chief Minister M.K. Stalin wrote to Finance Minister Nirmala Sitharaman, seeking her intervention, pointing out that the proposal was likely to result in “serious disruptions to the rural credit delivery system in Tamil Nadu and across many parts of south India”. The Ministry of Finance clarified that it has asked the RBI to ensure that the regulations on gold loans do not adversely impact small gold loan borrowers. It also noted that the new rules would be implemented only by January 1, 2026. Mr. Stalin had said that gold-backed loans serve as a primary source of short-term agricultural credit, especially for small farmers, and those engaged in allied sectors such as dairy and poultry.

Why did the RBI want to step in?

The draft directions come in the backdrop of the RBI highlighting irregular practices amid a significant increase in the loan-against-gold jewellery portfolio of some lenders in September 2024. In the last fiscal, the combined loans against gold jewellery portfolio of banks and NBFCs was estimated to have grown by over 50%; for banks alone, the business more than doubled, growing at 104%, which set alarm bells ringing.

The draft directions on loans against gold collateral aim to harmonise the regulatory framework across regulated entities and address the differences in lending practices. The directions aim at protecting the interest of borrowers; to provide clarity on certain credit and operational processes followed by lenders; and to enhance transparency and disclosure. C.V. Rajendran, Adviser, Arvog, said, “The draft circular comes at a critical juncture when rising gold prices and widening credit gaps are prompting more individuals, especially from the informal economy, to pledge household gold for short-term liquidity.”

What are the key changes?

The maximum Loan-To-Value (LTV) ratio remains capped at 75%. For consumption-based bullet loans, accrued interest must also be included in the LTV calculation, which effectively reduces the disbursed loan amount. “With LTV at disbursement likely to reduce to ensure compliance, this could impact growth in this portfolio,” said Subha Sri Narayanan, director, Crisil Ratings.

The draft proposes that borrowers furnish proof of ownership for the gold that will be used as collateral. Lenders are required to implement uniform procedures for assessing the purity and weight of gold. As per the RBI draft, gold accepted as collateral shall be valued based on the price of 22 carat gold. Concurrent loans for both consumption and income-generating purposes are to be prohibited. Loan renewals or top-ups are to be permitted only if the existing facility is classified as standard and complies with the prescribed LTV ratio. Borrowers must pay the entire outstanding amount, including both principal and interest, on the loan’s maturity date to avail a fresh loan. If the lending institution delays returning the collateral to the borrower beyond seven working days after loan repayment, then the lender is liable to pay the borrower a compensation of ₹5,000 per day for each additional day of delay.

How will changes impact regulated entities?

The changes are expected to reduce the flexibility of borrowers and curtail the ability of NBFCs to renew/top-up loans seamlessly. It will lead to increased compliance burden due to documentation, DSCR (debt service coverage ratio) norms, and monitoring. Smaller NBFCs that rely on re-pledging for liquidity will face funding constraints, leading to potential market consolidation. The higher operational costs could be passed on to borrowers through increased interest rates or charges. “Banks and NBFCs may need to reduce their current gold loan LTVs at disbursement to comply with these revised norms, potentially slowing down growth,” said Sankar Chakraborti, MD & CEO, Acuité Ratings & Research Limited.

Will a one-size-fits-all policy work?

Gold loans serve as a lifeline for many rural and semi-urban households, often being the only accessible source of formal credit. The RBI may consider creating differentiated regulatory norms for micro gold loans versus structured high-value gold loans.

What will be the impact on borrowers who pledge gold to avail a loan?

Gold loans, as a product, is positioned as a quick service loan with high flexibility in terms of repayment. Most borrowers mainly opt for gold loans to fund their short-term and immediate requirements. The draft directions from RBI are expected to enhance the disclosures and transparency which will help borrowers in their decision-making.

Nevertheless, the draft directions (if applied in their current form) will lead to revision in LTV computation which in turn could possibly reduce the quantum of loan offered to borrowers on same quantity of gold collateral, or alternately, may require the borrower to pledge higher quantity of gold for the same loan amount, ceteris paribus.

Borrowers may also need to better manage their cashflows to adhere to the requirement of repayment of the entire accrued interest for availing renewals or top-up loans.

The 75% LTV cap may limit the loan amounts disbursed, possibly impacting borrowers who need larger amounts.

The elimination of re-pledging of gold would pressure borrowers to repay the entire loan at once, possibly impacting borrowers’ liquidity.

Prohibition on financial gold (such as gold mutual funds and ETFs) as collateral may limit options for some borrowers.

With gold prices appreciating, how beneficial will the new norms be?

The appreciation in gold commodity prices does contribute to the growth momentum in gold loans, in general. Therefore, in the current scenario when gold prices are on the upturn, gold loans are likely to witness healthy growth.

However, if the draft directions are implemented in their current form, it may lead to a slower growth pick-up for NBFCs focused on gold loans than may have otherwise been the case; this would largely stem from directions pertaining to LTV and renewal/top-up of bullet loans.

Also, it is pertinent to note that as a standard practice, lenders take the previous 30-day moving average while calculating gold commodity value for any loan disbursement. Hence, any sharp appreciation or fall in commodity prices may not have an immediate impact on gold loan growth.

Additionally, lenders do maintain sound risk management practices in order to counter the risk associated with the volatility in gold prices. The draft directions will also ensure a stricter and standardised practice for LTV breaches.

“All in all, these draft directions will further structurally strengthen the sector to manage the gold price volatility cycles and also create a level-playing field across REs in terms of practices followed,” said Mr. Narayanan.