The Finance Ministry has issued directives to PSU banks concerning gold loan fraud. Additionally, the RBI has requested data from banks regarding this matter.
Gold Loan Fraud
The government has issued directives to all public sector banks regarding gold loan fraud. Recently, cases of violations of regulations related to gold loans have come to light, prompting the Finance Ministry to issue directives to all public sector banks. Along with this, a recommendation has been made to review gold loan portfolios.
Directives Issued by the Finance Ministry
The Department of Financial Services has advised banks to conduct a thorough review of the gold loan portfolios for the past two years, from January 1, 2023, to January 31, 2024, through a communication. This communication also discusses various concerns related to gold loans, including distribution of gold loans without expected gold collateral, fees, and cash repayment.
Data Requested by RBI
The RBI is also taking important steps to prevent fraud related to gold loans. The Reserve Bank has requested some crucial information from all banks. The central bank has directed banks to provide complete information on reported fraud in gold loans, defaults in portfolios, and efforts made to recover money. The RBI has also advised banks to review the process of transactions related to gold loans. Recently, there have been cases where bank employees have tampered with the system in gold loan cases. Therefore, the RBI has requested data from banks.
Rules for Granting Gold Loans
According to Reserve Bank regulations, any bank or non-banking financial company can only provide a loan of up to 75% of the value of the jewelry. However, in view of the COVID-19 pandemic, the limit for gold loans for non-agricultural purposes has been increased from 75% to 90%. This exemption was effective until March 31, 2021.
The government and RBI are taking stringent measures to prevent fraud related to gold loans. The directives issued to banks by the Finance Ministry and the data requested by the RBI are aimed at ensuring transparency and accountability in the gold loan sector.