Gold loans and personal loans provided by banks and financial institutions in India are experiencing a significant surge. This raises concerns about potential bad loans and irrecoverable amounts that could threaten financial stability.
Non-banking finance companies have seen a 26% year-on-year growth in gold loans during the first quarter of fiscal year 2024-25, with Rs792 billion sanctioned, according to the Finance Industry Development Council. Despite intense competition from banks, which have also increased their gold loan sanctions by 41% year-on-year, the demand for gold loans remains high due to their accessibility and the preference of individuals who cannot access other funding sources.
To mitigate future risks, regulators have directed lenders to address accounting gaps in these loans. Banks and non-banking finance companies have been instructed to review and rectify any deficiencies in their gold loan policies within three months. These measures aim to prevent irregular practices, such as concealing bad loans and evergreening through top-ups and roll-overs without proper appraisal and prudential norms.
Personal loans, on the other hand, have grown at a manageable rate, indicating no immediate cause for concern.
Research and development activities in India are still in their nascent stages. However, several multinational companies have established R&D centers in the country, which also function as global capability centers. The GST Council has recently exempted GST on research funding grants to institutions established under central and state laws, as well as those enjoying income-tax exemption, to incentivize research and promote patent development. Additionally, the government has commissioned three indigenously developed supercomputing systems and two high-performance computing systems for weather and climate research, under the National Supercomputing Mission, to support advanced scientific research in various fields.
Cybersecurity remains a significant challenge in the era of the internet and social media. The Indian Government has enacted the Data Protection Act and developed a National Cyber Security Strategy to create a secure digital ecosystem. However, there is a growing call for global standards to promote ethical AI platforms. At the recent World Telecommunication Standardisation Assembly, the Indian Prime Minister emphasized the need for a global framework to regulate digital technology, as cyber threats transcend national boundaries and require a united international approach.
The Reserve Bank of India's governor has also warned that the unchecked use of AI and machine learning poses risks of systemic instability and cyber attacks, urging financial institutions to implement robust risk mitigation measures.
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