Gold (Metal) Loans
Presently, nominated banks can extend Gold (Metal) Loans to exporters of jewellery who are customers of other scheduled commercial banks, by accepting stand-by letter of credit or bank guarantee issued by their bankers in favour of the nominated banks subject to authorised banks’ own norms for lending and other conditions stipulated by RBI. Banks may also extend the facility to domestic jewellery manufacturers, subject to the conditions as specified by RBI’s Master Circular RBI/2015-16/95 DBR.No. Dir.BC. 10/13.03.00/2015-16 dated July 1, 2015 on Loans and Advances- Statutory and Other restrictions. 2.154 The nominated banks may continue to extend Gold (Metal) Loans to jewellery exporters subject to the following conditions:
The exposure assumed by the nominated bank extending the Gold (Metal) Loan against the stand-by LC / BG of another bank will be deemed as an exposure on the guaranteeing bank and attract appropriate risk weight as per the extant guidelines.
The transaction should be purely on back-to-back basis i.e. the nominated banks should extend Gold (Metal) Loan directly to the customer of a nonnominated bank, against the stand-by LC / BG issued by the latter.
Gold (Metal) Loans should not involve any direct or indirect liability of the borrowing entity towards foreign suppliers of gold.
The banks may calculate their exposure and compliance with prudential norms daily by converting into Rupee the gold quantity by crossing London AM fixing for Gold / US Dollar rate with the rupee-dollar reference rate announced by RBI.
Banks should recognise the overall risks in extending Gold (Metal) Loans as also in extending SBLC / BG. Banks should lay down an appropriate risk management / lending policy in this regard and comply with the recommendations of the Ghosh Committee and other internal requirements relating to acceptance of guarantees of other banks to obviate the possibility of frauds in this area.
Nominated banks are not permitted to enter into any tie up arrangements for retailing of gold / gold coins with any other entity including nonbanking financial companies / co-operative banks / non-nominated banks.