RBI observes irregular practices in grant of loans against gold jewellery

The RBI identified concerning practices among certain financial institutions regarding loans against gold jewellery. These practices include discrepancies in loan disbursements, incorrect valuation processes, and failure to adhere to internal lending protocols. The RBI emphasized the importance of adhering to proper guidelines to mitigate risks associated with gold loans, particularly as such loans form a significant part of credit portfolios for non-banking financial companies (NBFCs) and small finance banks. The central bank is expected to introduce corrective measures, including stricter audits, revised lending guidelines, and enhanced monitoring to ensure transparency and accountability in the lending process. Such reforms are seen as critical for safeguarding the interests of borrowers and maintaining the integrity of the gold loan market.