Lok Sabha Question No. 82 (STARRED), answered on 2025-02-10
Subject: Gold Loan NPAs in Banks and NBFCs
Ministry: FINANCE
Asked by: Smt. Kanimozhi Karunanidhi, Shri Anand Bhadauria

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA STARRED QUESTION NO. *82

ANSWERED ON MONDAY, 10 TH  FEBRUARY, 2025 / MAGHA 21, 1946 (SAKA)

## GOLD LOAN NPAs IN BANKS AND NBFCs

## *82. SHRI ANAND BHADAURIA: SMT KANIMOZHI KARUNANIDHI

Will the Minister of FINANCE be pleased to state:

- (a) whether gold loan NPA has been increased by 30% in the first quarter of 2024-25 as per the data of RBI;
- (b) if so, the details of Non-Performing Assets (NPAs) arising from gold loans during the last five years, year-wise, bank-wise and Non-Banking Finance Company (NBFC)-wise;
- (c) whether commercial banks have reported 62% rise in gold loan NPA to Rs. 2445 crore in June, 2024 from Rs. 1513 crore in March, 2024 and if so, the details thereof, bank-wise;
- (d) the percentage of gold loan NPAs in the overall loan portfolio of banks and Non-Banking Financial Companies (NBFCs) during the current financial year; and
- (e) the steps taken by the Government to mitigate the risk of NPAs in the gold loan sector along with the measures taken to improve credit access for small borrowers while ensuring proper valuation and risk assessment in gold loan disbursals?

## ANSWER

## FINANCE MINISTER (SMT. NIRMALA SITHARAMAN)

(a) to (e): A statement is laid on the Table of the House.

*****

Statement  referred  to  in  reply  to  parts  (a)  to  (e)  in  respect  of  Lok  Sabha  Starred Question  No.  *82  for  reply  on  10.02.2025  regarding  Gold  Loan  NPAs  in  Banks  and NBFCs asked by Shri Anand Bhadauria and Smt Kanimozhi Karunanidhi.

(a)  to  (e):  The  gross  non-performing  assets  (GNPAs)  pertaining  to  gold  loan  in  Scheduled Commercial  Banks  (SCBs)  and  Upper  and  Middle-Layer  Non-Banking  Financial  Companies (NBFCs) have increased  by  18.14%  from  March  2024  to  June  2024,  and  the  gross  GNPAs pertaining to gold loan in SCBs have increased by 21.03% during the same period. Further, as on 30.6.2024, gross NPA ratio pertaining to gold loans in SCBs was 0.22 % and that of upper layer and middle layer NBFCs was 2.58 %.

In accordance with extant RBI guidelines, banks and NBFCs are taking several steps to mitigate the  risk  involved  in  gold  loans  and  to  ensure  proper  valuation  of  gold  offered  as  collateral. These include, inter alia, the following:

- (a) Assessment and Reassessment of gold offered as collateral at regular intervals to ensure purity  of  gold  by  various  methods,  such  as  acid  tests,  touchstone  testing,  X-ray fluorescence (XRF) analysis, etc.
- (b) Empanelment of trained and skilled appraisers to assess the value of gold pledged.
- (c) Valuation of the gold pledged by the borrower is done under CCTV surveillance in the presence of Branch Officials and borrower.
- (d) Audits at periodic interval is carried out, inter alia, to ensure that gold loans are made in accordance with the regulatory guidelines and internal policies.
- (e) Auctioning  of  pledged  gold  is  undertaken  in  case  customer  failing  to  repay  the  loan, while ensuring advance notice is sent to customers giving them sufficient time to clear the liability.

Further, number of steps have been taken by the government and the Reserve Bank of India (RBI)  to  mitigate  the  risks  of  NPAs  in  the  gold  loans.  Such  steps  include, inter  alia, the following:

- (a) The Department of Financial Services, vide its communication dated 27.02.2024, advised Public Sector Banks (PSBs) to conduct a comprehensive review, including assessment and  assaying  of  collateral, analysis  of  interest  and  other  charges  collected  from borrowers, etc .,  of  entire  gold  loan  portfolio  sanctioned/disbursed  during  the  period from 1.1.2022 to 31.1.2024, to ensure that gold loans disbursed by banks are adhered to regulatory requirements and internal policies of the bank.
- (b) RBI,  on  30.09.24,  advised  supervised  entities  (SEs)  to  comprehensively  review  their policies, processes and practices on gold loans to identify gaps, and initiate appropriate remedial  measures  in  a  timebound  manner.  SEs  were  also  advised  to  closely  monitor their  gold  loan  portfolio  and  to  ensure  that  adequate  controls  are  in  place  over outsourced activities and third-party service providers.
- (c) To safeguard lenders against risks such as gold price fluctuations, valuation errors, etc., as per the extant RBI instructions, regulated entities including banks and NBFCs are not permitted to extend loans exceeding 75 per cent of  the value of  gold ornaments and
- jewellery.  This  Loan-to-Value  (LTV)  ratio  of  75%  is  required  to  be  maintained throughout the tenure of the loan.
- (d) Further, for loans where both interest and principal are due for payment at maturity of the  loan  (bullet  repayment  loans),  banks  are  not  permitted  to  extend  loans  exceeding tenure of 12 months from the date of sanction so as to reduce the risk of loan defaults.

Further,  to  support  the  small  borrowers,  the  aforesaid  LTV  ratio  is  not  applicable  to  loans extended by SCBs for agriculture purpose, and in terms of RBI guidelines, lenders are permitted to make cash disbursement up to Rs. 20,000 in case of gold loans.

*****