The Reserve Bank of India (RBI) has pointed out several irregular practices in the gold loan sector in a notification issued on September 30. It has appealed to the lending firms to review their policies and keep a close watch on their gold loan portfolios. According to a statement released by the RBI on Monday, the central bank has stressed the need to take immediate corrective steps to ensure compliance with the guidelines and should also protect customers’ interests.
Issues in the Gold loan process
After conducting a recent review, the RBI has pointed out the many major deficiencies in the management of how the loans are taken against gold ornaments and jewellery. Some of the loopholes observed by the RBI are:
1. Valuing the gold in the absence of the customer.
2. Dependency on third parties for loan sourcing.
3. The valuation process of gold lacks diligence.
4. Lack of supervision while approving gold loans.
5. Transparency is not followed in cases of default during the auctioning of the gold ornaments.
Lenders are advised to act diligently
The Central Bank has also raised concern over mismanagement in handling risk-weighting procedures and loan-to-loan ratios. Lenders have been strictly instructed to take action within the stipulated three months, in case of non-compliance RBI could take supervisory action against them. The RBI has urged the lenders to take a detailed review of their policies, address the issues promptly and initiate corrective measures.
(With PTI inputs)