Irregularities in giving loans by mortgaging gold jewelry, Reserve Bank gave instructions to review the policy
New Delhi| There is a lot of misappropriation in the loans given in lieu of gold. The Reserve Bank of India has taken cognizance of this. RBI has directly asked such banks and financial institutions to take action against such activities. Besides, policies and loan portfolio should also be reviewed. Reserve Bank of India i.e. RBI said on Monday, we have seen irregularities in many institutions. Our recent review has revealed several shortcomings regarding giving loans by mortgaging gold jewelry.
These major deficiencies include deficiencies in the use of third parties for sourcing and valuation of loans, valuation of gold without customer presence, inadequate due diligence and lack of end-use monitoring of gold loans, default on the customer’s side. Lack of transparency during auction of gold jewelry, The monitoring of loans for value (LTV) involves shortcomings and incorrect application of risk-weighting.
The RBI said the gold loan portfolio should be closely monitored, especially in view of the significant increase in portfolios in some entities. RBI said, it should also be ensured that there is adequate control over outsourced activities and third party service providers. Information about the action taken in this matter should be given to the Senior Supervisory Manager (SSM) of the Reserve Bank within three months. Any non-compliance with regulatory guidelines will be taken seriously and supervisory action will be taken, among other things.
