KOCHI, Nov 2: Kerala's traditional money lenders and private banks are in for a crisis following the free fall in gold prices over the past couple of weeks. The thriving money lending institutions, which made a fortune in gold loans by charging exorbitant interest rates, are finding themselves in the dock as most of the debtors are unwilling to redeem their collaterals following the price crash.

According to industry sources here, the institutions are also finding it difficult to realise loans, including principal and interest, by selling off the gold in open market because the prices for collateral are lower than the principal amount and interest put together. Most of these institutions have also slashed the maximum advance limit against gold considerably.

Sources said when the gold price was ruling at Rs 4,500 per sovereign a majority of the non-banking finance companies and banks used to advance Rs 325 to Rs 350 per gram. However, with the gold prices crashing to the level of Rs 3,200 the institutions have revised their advances to Rs 200 per gram.Sources also said that it was the fourth time that most of the banks and the non-banking finanane companies revised their advance limit against gold loan. When the price was ruling at Rs 3,500 to Rs 3,750 per sovereign the loan limit was pegged at Rs 312 per gram. It was slashed to Rs 275 to Rs 250 and further shrunk to Rs 200 per gram now.

Industry sources also said that the scheduled banks in the State were also planning to revise the advance limit against gold.

As of now Bank of Baroda is giving Rs 275 per gram, Bank of India, State Bank of Travancore and Canara Bank Rs 250, State Bank of India and Indian Overeas Bank Rs 300 and Central Bank Rs 240 per gram.

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