RBI finds irregular practices in gold loans, asks lenders to review policies, monitor portfolio

The Reserve Bank of India (RBI) connected Monday said it has observed respective irregular practices by golden indebtedness businesses, and asked entities to reappraisal their policies and besides undertake a portfolio review.

A caller reappraisal connected adherence to prudential guidelines revealed respective deficiencies with respect to loans against pledge of golden ornaments and jewellery, the cardinal slope said successful a connection to lenders.

The large deficiencies see shortcomings successful usage of 3rd parties for sourcing and appraisal of loans, valuation of golden without the beingness of the customer, inadequate due-diligence and deficiency of end-use monitoring of golden loans and deficiency of transparency during auction of golden ornaments and jewellery successful lawsuit of a default, the RBI said.

A caller survey by the standing bureau Icra said determination is simply a handsome maturation successful the golden loans contempt caller actions by the regulator and estimated the portfolio of organised golden lenders to turn to Rs 10 lakh crore by March 2025.

It besides recovered weaknesses successful monitoring of indebtedness to worth ratios and incorrect exertion of risk-weights, among different shortcomings.

It advised each supervised entities into the golden indebtedness concern to undertake a "comprehensive review" of their policies and process, place the gaps and initiate due remedial measures successful a "timebound manner".

"The golden indebtedness portfolio should beryllium intimately monitored, particularly successful the airy of important maturation successful the portfolio successful definite SEs (supervised entities)," the notification read.

It should besides beryllium ensured that capable controls are successful spot implicit outsourced activities and third-party work providers, the RBI notification added.

The golden indebtedness entities whitethorn pass the RBI's elder supervisory manager astir the enactment taken wrong 3 months, it said.

"Non-compliance with regulatory guidelines successful this respect volition beryllium viewed earnestly and volition attract, among different things, supervisory enactment by the RBI," it warned.