Gold Loan: If banks-NBFCs break the rules of gold auction, action will be taken, Finance Minister Sitharaman bluntly said
New Delhi| Action will be taken if a borrower fails to repay the gold loan and the procedures laid down for gold auction are violated by banks and non-banking financial companies (NBFCs). Finance Minister Nirmala Sitharaman gave this assurance in the Lok Sabha on Monday. During Question Hour in the Lok Sabha, he said that non-banking financial companies (NBFCs) and scheduled commercial banks (SCBs) are guided by the same rules.
He told the Lok Sabha that if a borrower fails to repay the gold loan then there are very well laid down and strict procedures for gold auction by NBFCs and banks. NBFCs and banks follow these procedures. There is a process of giving adequate number of notices to bank account holders to tell them that their service is not good. The minister said that if a borrower does not return to make the payment, the bank or NBFC will be forced to auction. Sitharaman stressed that there are very well-settled and strict procedures for auctions too.
“If these processes are violated, we actually have to take action, but the processes are followed by banks”, he said… I think if there are specific cases where the prescribed norms have been violated, I am ready to take details and take action on it
The minister was answering questions from DMK leader Kanimozhi Karunanidhi, in which she had said that gold is auctioned when an organization defaults in repayment of gold loan. Answering the question of Congress leader Manish Tiwari, the Finance Minister said that the demand for gold in India has not reduced, but on the contrary it is increasing.
“In India, especially for families, small businesses, investing in gold is a common practice because they think it is much safer and more liquid”, he said. As an asset class, we see that families and small businesses, as well as women in India, have a sustained interest in it”
Finance Minister Nirmala Sitharaman also clarified in the Lok Sabha on Monday that India’s rising gold reserves, including those held by the Reserve Bank of India (RBI), are not intended to be an exercise in replacing any international currency. He responded to Congress MP Manish Tewari’s concern over whether the global shift towards gold is a sign of moving away from the US dollar as a major settlement mechanism.
