RBI flags irregularities in gold loan practices, warns of supervisory action for non-compliance with guidelines.

According to a statement released by the RBI on Monday, the central bank has stressed the need to take immediate corrective steps to ensure compliance with the guidelines and should also protect customers' interests.

Move comes after several irregularities like rolling over of loans, evergreening of loans, and non-categorisation as NPAs were found

The deficiencies were observed during a recent review of lenders’ adherence to prudential guidelines as well as practices with regard to gold loans

RBI flags irregular practices in gold loans by SEs, directs comprehensive review and remedial measures in timebound manner.

Against that backdrop, RBI said that the gold loan portfolio should be closely monitored, especially in light of significant growth in the portfolio in certain entities.

The Reserve Bank of India (RBI) on Monday asked gold loan financiers to review policies, processes and practices while offering such loans. The central bank’s direction came after it found major deficiencies in loans offered by supervised entities (SEs) against pledge of gold ornaments and jewellery.

The major deficiencies include shortcomings in use of third parties for sourcing and appraisal of loans, valuation of gold without the presence of the customer, inadequate due-diligence and lack of end-use monitoring of gold loans and lack of transparency during auction of gold ornaments and jewellery in case of a default,