RBI - Gold (Metal) Loans – Repayment

Last updated: 25 June 2021

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The Reserve Bank of India has updated the guidelines for Gold (Metal) Loans (GML). Banks can now offer borrowers the option to repay a portion of their GML in physical gold, provided certain conditions are met. These conditions include the gold being locally sourced, repayment using specific standards (IGDS/LGDS), and delivery by a refiner or central agency. Banks must incorporate these changes into their policies and inform borrowers transparently.

Reserve Bank of India

RBI/2021-22/58
DOR.CRE(DIR).REC.24/23.67.001/2021-22

June 23, 2021

All Scheduled Commercial Banks
(excluding Regional Rural Banks)

Madam / Dear Sir,

Gold (Metal) Loans - Repayment

Please refer to instructions issued vide circulars DBOD.No.IBS.1519/23.67.001/98-99 dated December 31, 1998, DBOD.No.IBS.3161/23.67.001/98-99 dated June 25, 1999, DBOD.No.IBD.BC.33/23.67.001/2005-06 dated September 5, 2005, DBOD.No.IBD.BC.71/23.67.001/2006-07 dated April 3, 2007 and DBOD.No.IBD.BC.104/23.67.001/2013-14 April 2, 2014 on the captioned subject.

2. As per the extant instructions, nominated banks authorized to import gold and designated banks participating in Gold Monetization Scheme, 2015 (GMS) can extend Gold (Metal) Loans (GML) to jewellery exporters or domestic manufacturers of gold jewellery. These loans are repaid in INR, equivalent to the value of gold borrowed, on the relevant date/s.

3. On a review, it has been decided as under:

i) Banks shall provide an option to the borrower to repay a part of the GML in physical gold in lots of one kg or more, provided:

a. the GML has been extended out of locally sourced / GMS-linked gold;

b. repayment is made using locally sourced IGDS (India Good Delivery Standard)/ LGDS (LBMA’s Good Delivery Standards) gold;

c. gold is delivered on behalf of the borrower to the bank directly by the refiner or a central agency, acceptable to the bank, without the borrower’s involvement;

d. the loan agreement contains details of the option to be exercised by the borrower, acceptable standards and manner of delivery of gold for repayment;

e. the borrower is apprised upfront, in a transparent manner, of the implications of exercising the option.

ii) Banks shall suitably incorporate the above aspects into the board-approved policy governing GML along with concomitant risk management measures. Banks shall continue to monitor the end-use of funds lent under GML.

4. All other instructions issued on GML shall remain unchanged.

Yours faithfully,

(Manoranjan Mishra)
Chief General Manager

FAQ :

The Reserve Bank of India has introduced an option for borrowers to repay a part of their Gold (Metal) Loans in physical gold.

Nominated banks authorised to import gold and designated banks participating in the Gold Monetisation Scheme, 2015 (GMS) can extend these loans.

The GML must be extended from locally sourced or GMS-linked gold, repayment must use IGDS or LGDS gold, and the gold must be delivered directly by a refiner or central agency to the bank on behalf of the borrower.

The loan agreement must detail the option for the borrower to repay in gold, acceptable standards for the gold, and the method of delivery for repayment.

Banks must incorporate these aspects into their board-approved policy, include risk management measures, and transparently apprise borrowers of the implications.

Notification No : RBI/2021-22/58 DOR.CRE(DIR).REC.24/23.67.001/2021-22
Source : https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12117&Mode=0

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