The Ministry of Finance has written to public sector banks asking them to review their gold loan policies due to worries about dangerous debt as gold prices rise.According to the sources, the move has come against the backdrop of an annual increase in gold loans. As of January 26, loans secured by gold jewelry had reached Rs 1.01 lakh crore. This increase in loans was 17%, reflecting the 16.6% increase in gold prices.All state-run banks were given instructions by the Finance Ministrys Department of Financial Services (DFS) last month to carefully examine any gold loan accounts that were opened after January 1, 2022.While speaking to ANI on Tuesday, Vivek Joshi, Secretary, the Department of Financial Services said that the ministry has directed the banks in written to scrutinize every gold loan account.On the other hand, All India Gem and Jewellery Domestic Council (GJC) anticipates that gold prices will reach the historic peak of Rs 70,000 per 10 grams in the coming year due to ongoing global uncertainties and geopolitical crisis. Before this, on March 4, in an action against IIFL Finance Limited, the Reserve Bank of India directed the company to cease, with immediate effect, from sanctioning or disbursing gold loans or assigning/ securitizing/ selling any of its gold loans. The company can, however, continue to service its existing gold loan portfolio through the usual collection and recovery processes, as per official press release.Action against IIFL Finance Limited under Section 45L(1)(b) of the Reserve Bank of India Act, 1934https://t.co/8B9sNWKicG— ReserveBankOfIndia (@RBI) March 4, 2024In the official press release, the RBI said that supervisory restrictions will be reviewed after the completion of the special audit.
