RBI observed several irregular practices followed by Supervised Entities^[1] (‘SEs’) with regard to loans against pledge of gold ornaments and jewellery, including valuation of gold without the presence of the customer, inadequate due diligence and lack of end use monitoring of gold loans, weaknesses in monitoring of LTV and incorrect application of risk-weights.

RBI, therefore, advised all SEs to, within three months from September 30, 2024, comprehensively review their policies, processes and practices on gold loans to identify gaps, and initiate appropriate remedial measures in a timebound manner. SEs have also been called upon to closely monitor their gold loan portfolios, especially in light of significant growth in the portfolio of certain SEs, and put in place adequate controls over outsourced activities and third-party service providers.

[1] Supervised Entities comprise commercial banks (including small finance banks but excluding regional rural banks and payments banks), primary (urban) co-operative banks and non-banking financial companies.