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| Photo Credit: C. Venkatachalapathy
The Finance Ministry has directed all state-owned banks to review their gold loan portfolio as situations of non-compliance with regulatory norms have been observed by the federal government.
The Department of Financial Services (DFS) in a communication addressed to heads of public sector banks has requested them to take a look at their system and processes associated to gold loan.
“We have asked banks to undertake comprehensive review of the gold loan business,” Financial Services Secretary Vivek Joshi advised PTI.
A directive on this regard was issued final month advising them to repair anomalies referring to assortment of charges and curiosity and closure of gold loan accounts.
The letter flagged varied considerations, together with disbursement of gold loans with out requisite gold collateral, anomalies concerning assortment of charges and reimbursement in money.
The DFS urged banks to undertake a radical review of the final two-year interval from January 1, 2022 to January 31, 2024 in order to make sure that all gold loans had been disbursed in compliance with regulatory necessities and inside insurance policies of banks.
It is to be famous that the value of the yellow steel has surged to a document degree. Price of 10 gm gold within the final one month has jumped from Rs 63,365 to Rs 67,605.
According to the letter, the division has come throughout situations of non-compliance concerning the gold loan portfolio and therefore issued the advisory.
The nation’s greatest lender, State Bank of India (SBI) alone has a gold loan portfolio of Rs 30,881 crore as of December 2023.
Punjab National Bank’s gold loan publicity stood at Rs 5,315 crore whereas Bank of Baroda was at Rs 3,682 crore on the finish of third quarter.
As per the RBI norms, banks or gold loan finance corporations can present solely 75 per cent of the worth of the jewelry. However, rest was offered in the course of the COVID-19 interval to mitigate hardship.
The RBI had elevated the permissible Loan to Value (LTV) for loans sanctioned by banks towards pledges of gold ornaments and jewelry for non-agricultural functions to 90 per cent from 75 per cent in August 2020. This rest was out there until March 31, 2021.
Last week, the RBI barred IIFL Finance Ltd from disbursing gold loans, with instant impact following a number of supervisory considerations, together with severe deviations in assaying and certifying the purity of the yellow steel.
RBI mentioned the supervisory restrictions might be reviewed upon completion of a particular audit to be instituted by it and after rectification by the corporate of the particular audit findings and the findings of RBI inspection to the satisfaction of the central financial institution.
