On Sep. 30, IND RBI addressed gold pledge loans irregular practices.
IND RBI issued circular addressing irregular practices in loans against pledge of gold ornaments and jewellery, after review revealed irregularities in gold loan activities.
Deficiencies Identified
Shortcomings in use of third parties for sourcing and appraisal of loans, valuation of gold without customer presence, inadequate due diligence, lack of end use monitoring.
Lack of transparency during auction of gold on customer default, weaknesses in the monitoring of loan-to-value (LTV) ratio, and an incorrect application of risk-weights.
IND RBI Directives
Supervised entities (SEs) to comprehensively review policies, processes, and practices on gold loans, identify gaps and initiate remedial measures in a timebound manner.
Closely monitor gold loan portfolio, especially given significant growth in certain SEs, ensure adequate controls over outsourced activities and third-party service providers.
Effectiveness
Action taken with regard to the above may be informed to the senior supervisory manager of IND RBI within three months of the date of this circular, i.e. Dec. 30, 2024.
