RBI streamlines gold lending procedures and ethical conduct
Same collateral should not be concurrently used for income generating loans and consumption loans

Banks and NBFCs reported gold loan outstanding to Rs 1.78 lakh crore as of January 2025, registering a growth of 76.9 per cent on a year-on-year basis. (Representational image: File)
Chennai: After having found several discrepancies in the gold lending business in an earlier review, RBI has issued a harmonised regulatory framework to provide clarity on lending practices and ethical conduct.
Lenders should not grant any advance against primary gold or silver or financial assets backed by them like units of Exchange-traded funds (ETFs) or Mutual Funds. Same collateral should not be concurrently used for income generating loans and consumption loans. Loans should not be extended when ownership of the collateral is doubtful.
Further, lenders should have a ceiling on the loan portfolio secured by eligible gold collateral as a proportion of their total loans and advances. There should also be a ceiling on the quantum of loan to a single borrower against eligible gold collateral according to the purpose of the loan.
In the case of bullet repayment of both principal and interest of consumption loans upon maturity, the tenure should be capped at 12 months. Bullet repayment loans by Cooperative banks and RRBs are subject to a maximum ceiling of Rs 5.00 lakh per borrower.
The aggregate weight of either gold or silver ornaments pledged for loan should not exceed 1 kg per borrower and coins should not exceed 50 grams per borrower in case of gold, and 500 grams per borrower in case of silver. Standardised procedure has to be in place to assay the purity of gold and the borrower should be present while assaying.
Documentation and loan agreement should be standardised across branches of the lender with details of value of collateral.
Lenders should implement a transparent auction procedure, give adequate notice period, issue advertisements in at least two newspapers, one in the regional language and another in a national daily and the auction should be conducted only through auctioneers empanelled by the lender.
In case of any damage to the gold collateral by the lender, the cost of repair should be borne in case of loss, lenders should apprise the customer immediately about the incident.
In case of delay in release of gold collateral after settlement of loan, the lender should compensate the borrower at the rate of Rs 5,000 for each day of delay beyond the timeline.
The pledged gold collateral lying with the lenders beyond two years from the date of settlement should be treated as unclaimed. Lenders should not issue misleading advertisements with unrealistic claims on gold loan products.
The recovery agents of lenders should abide by the directions issued by the Reserve Bank on recovery related conduct.
Lenders should not grant any advance against primary gold or silver or financial assets backed by them like units of Exchange-traded funds (ETFs) or Mutual Funds. Same collateral should not be concurrently used for income generating loans and consumption loans. Loans should not be extended when ownership of the collateral is doubtful.
Further, lenders should have a ceiling on the loan portfolio secured by eligible gold collateral as a proportion of their total loans and advances. There should also be a ceiling on the quantum of loan to a single borrower against eligible gold collateral according to the purpose of the loan.
In the case of bullet repayment of both principal and interest of consumption loans upon maturity, the tenure should be capped at 12 months. Bullet repayment loans by Cooperative banks and RRBs are subject to a maximum ceiling of Rs 5.00 lakh per borrower.
The aggregate weight of either gold or silver ornaments pledged for loan should not exceed 1 kg per borrower and coins should not exceed 50 grams per borrower in case of gold, and 500 grams per borrower in case of silver. Standardised procedure has to be in place to assay the purity of gold and the borrower should be present while assaying.
Documentation and loan agreement should be standardised across branches of the lender with details of value of collateral.
Lenders should implement a transparent auction procedure, give adequate notice period, issue advertisements in at least two newspapers, one in the regional language and another in a national daily and the auction should be conducted only through auctioneers empanelled by the lender.
In case of any damage to the gold collateral by the lender, the cost of repair should be borne in case of loss, lenders should apprise the customer immediately about the incident.
In case of delay in release of gold collateral after settlement of loan, the lender should compensate the borrower at the rate of Rs 5,000 for each day of delay beyond the timeline.
The pledged gold collateral lying with the lenders beyond two years from the date of settlement should be treated as unclaimed. Lenders should not issue misleading advertisements with unrealistic claims on gold loan products.
The recovery agents of lenders should abide by the directions issued by the Reserve Bank on recovery related conduct.
( Source : Deccan Chronicle )
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