RBI toffee of 90% LTV limit on Gold loan

Today, RBI did something phenomenal - LTV was increased from 75% to 90%.

As usual, Retail investor got excited and bought Muthoot at such high valuations and increased the share by 5% and then the institutional investors cashed in and booked the profit. Retail investors once again found on wrong foot. 

Anyway, gold loan is a complex business and that is why it is very difficult to disrupt this business. Even the marquee VC investors and their portfolio Rupeek.com has failed to disrupt the market

The complexity of the gold loan business is due to 

1. Requirement of physical custody of gold
2. Low margins 
3. Requirement of stringent testing amid so many frauds
4. Special Jewelry which is made fraudulently just for gold loans (This is the category which is evolving very fast over last couple of years)

Muthoot and other NBFC's have developed skills and expertise related to gold loans and RBI has made their job easy by putting up 75% limit in the past. This limit derisked the gold loan business and these NBFC's expanded very fast. Cash for gold was booming due to increase in value of gold in last couple of years. Recently, due to COVID, banks also expanded very fast in gold loan as it was low risk business

It seems this move was instigated by the bankers lobby as the NBFCs were left high and dry. RBI have tied both legs of NBFC's by 75% LTV and made the banks to run full fast by 90% LTV.

Is this fair?

Is this prudent ?

Isn't this repeat of 2013 movie of sudden drop in gold prices ?

Why not NBFC, they dont have any public money?

RBI has far too many questions to answer on this unwarranted step. Without going into this argument, it is interesting too into the after-affects. 

Today's change disrupted the market irreversibly and made gold loan as risky business

1. Banks will now be confused as they will not be able to take so much of risk of higher LTV and lower LTV will not fetch them business
2. Big NBFC's can't trust their employees for accurate testing and give 90% LTV
3. Smaller banks like CSB, Federal, Fincare may take a good pie but again at the risk of default. (Is RBI really prudent in this step??)

Future Projections

New contours of competition will evolve as under 

1. Banks will project themselves as low interest high LTV lender
2. NBFC's will get confused first and then they will develop their own positioning with multiple products with multiple LTV's

LTV will become a real weapon for competition and gold loan will now shift towards personal loan and quality of borrower along with the quality of gold will become the new criterion for evaluation of the loan quality. 

What will AGLOC do ?

Will Muthoot Mannapuram file case against RBI?

Can this be treated against the Article 19 of constitution ?

Article 19 (1) (g) guarantees that all citizens shall have the right to practice any profession, or to carry on occupation, trade or business.

Is this strong enough ground to challenge RBI ?