Finance Ministry Advisory: The Finance Ministry has instructed all public sector banks to review their gold loan portfolio. These instructions have been given due to violation of regulatory rules in giving gold loan. Last month itself, the government has asked all the government banks to remove the discrepancies in fee collection, interest and closing of gold loan accounts as soon as possible. These instructions were issued last month itself.
Many complaints came to light regarding gold loan
The Finance Ministry has asked all public sector banks to immediately remove the regulatory issues facing the gold loan portfolio. The Department of Financial Services (DFS) has sent a letter to the heads of public sector banks asking them to improve the system and process related to gold loans. Financial Services Secretary Vivek Joshi told PTI that we have asked public sector banks to immediately start a comprehensive review. Many complaints have come to light regarding gold loans. These include giving loans without sufficient gold, fee collection and taking repayment in cash.
Banks should review the gold loans distributed during 2 years
DFS has asked banks to review the gold loans disbursed during the two years from January 1, 2022 to January 31, 2024. This will enable us to know whether all the gold loans were distributed within the ambit of banks and regulatory rules or not. It is noteworthy that gold rates are increasing rapidly. In the last one month itself, the rate of gold per 10 grams has jumped from Rs 63,365 to Rs 67,605. According to the letter from the Finance Ministry, the rules in the gold loan portfolio were being manipulated. Therefore the ministry had to take this step.
IIFL Finance was banned
The gold loan portfolio of the country's largest bank SBI was Rs 30,881 crore till December 2023. Apart from this, by the end of the third quarter the same figure of PNB was Rs 5,315 crore and that of Bank of Baroda was Rs 3,682 crore. According to RBI rules, gold loan can be given only up to 75 percent of the value of jewellery. However, due to Covid 19, some relaxation was given in these rules. The loan to value ratio was increased to 90 percent for non-agricultural purposes. This facility was given till March 31, 2021. Last week, RBI had banned IIFL Finance from distributing gold loans.
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