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RBI strengthens regulations on Gold Metal Loans by member banks

iconApr 4, 2014 09:07
Source:SMM
The Reserve Bank of India (RBI) has announced new set of regulations to its member banks for grant of gold metal loans (GML) to jewellers.

Author: Paul Ploumis03 Apr 2014 Last updated at 08:26:52 GMT

MUMBAI (Scrap Monster): The Reserve Bank of India (RBI) has announced new set of regulations to its member banks for grant of gold metal loans (GML) to jewellers. This follows detection of certain instances of fraud by unscrupulous jewellers.

The country’s Central Bank in a fresh notification issued yesterday, urged all banks to carry out detailed credit appraisal of the borrowing jewellers and not to rely on stand-by letter of credits or bank guarantees issued by other banks. Lack of proper monitoring mechanisms has lead to misuse of gold metal loans by some jewellers, RBI noted.

The RBI also advised the lending banks to have a thorough study of the track record and credit worthiness of borrowers. They may also approach credit information companies to obtain the true credentials of the borrower. The limit of the loan may be fixed by the nominated bank itself after due diligence to the creditworthiness of jewellers.

As per RBI regulations, gold metal loans can be availed of only by gold jewellers, who are themselves manufacturers of gold jewellery. The jewellers cannot sell the gold borrowed under GML scheme to any other party to manufacture jewellery. 

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