Gold Loan: The Reserve Bank of India (RBI) has issued a new draft regarding gold loans, which aims to make the rules uniform, transparent and safe. RBI has maintained the ban on giving loans on raw gold (such as bullion), but loans are allowed against gold jewelry and fixed coins.
The Reserve Bank of India (RBI) has issued a new draft regarding gold loan, which aims to make the rules uniform, transparent and safe. RBI has maintained the ban on giving loans on raw gold (such as bullion), but loans are allowed against gold ornaments and fixed coins. The draft clarifies in detail the loan value, gold testing, auction process, security of jewelry and compensation policy.
1- Gold loan will now be available only on jewelry and fixed coins. Loans will not be given on raw gold (such as bars, biscuits, bullion). Loans will be available only on gold ornaments, jewellery and some special gold / silver coins.
2- There will be two types of gold loans. Income generating loans (such as for agriculture, business)
Consumption loans (such as marriage, treatment, household expenses) will be available. The loan will be identified according to its purpose, not just on the basis that gold is pledged in it.
3- The loan amount and tenure will be decided according to the need and income of the person. The loan will not be decided only on the value of gold. The borrower’s repayment capacity will be evaluated before giving the loan.
4- There will be a uniform method to determine the value of gold. The price of gold will be decided according to 22 carats. If the gold is of less carats then its value will be considered less. At the time of evaluation, the value of stones or gems in the jewelry will not be added. A certificate will be given which will have complete information about weight, purity and deduction.
5- A maximum loan of 75% will be available in consumption loan. This limit is applicable in all types of gold loans for NBFCs. If the LTV rule is violated, the bank will have to keep additional amount in reserve.
6- The same gold cannot be pledged for two loans. Loan will not be given on the jewelry whose ownership has not been decided. Loan will not be available on jewelry already pledged. A person cannot take a loan on more than one kg of gold/silver jewellery or 50 grams of gold coin.
7- The jewellery will be kept only in the branch and the same staff will handle them. The branch should have the facility of a safe locker. The jewellery will be inspected and audited from time to time.
8- The jewellery will have to be returned within 7 working days of repaying the loan. The jewellery will be checked at the time of return.
9- It is mandatory to advertise in the newspaper and give notice to the customer before the auction. The first auction will be held in the same city or tehsil where the loan was taken. The reserve price of the auction should be at least 90% of the value of gold. The bank or its associated people cannot participate in the auction. The money left after the auction will have to be returned to the customer within 7 days.
10- If the jewellery is damaged due to the mistake of the bank, then the bank will bear the cost of repair. If the jewellery is lost, the bank will compensate. If the jewellery is not found on time even after repaying the loan, then a compensation of ₹5000 per day will have to be paid.
11- All documents will be same and information will be given to the customer in the language of his choice.
Illiterate customers will be given information in the presence of a witness.
12- Misleading advertisements cannot be given. Hallmarked gold will be given priority. The loan amount will go directly to the customer’s account, there will be no middleman. Giving gold loan repeatedly to the same customer will be done carefully.
13- Banks/NBFCs will have to tell how many gold loans they gave, how many were given for consumption and how many for income. This information will be given to RBI every six months.
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