RBI Gold Auction Norms for Banks and NBFCs
Why in the news
RBI issued clear directions for auctions of pledged gold held by scheduled commercial banks, NBFCs and primary cooperative banks, stressing transparency and non-discrimination.
Key facts
- Reserve price: at least 85% of the average closing price of 22 carat gold over the last 30 working days.
- For lower-carat gold, the price is adjusted proportionately.
- Auction by a board-approved auctioneer; bidders must meet KYC norms.
- The original borrower may take part and try to reclaim the gold.
- Surplus proceeds above the loan dues go back to the borrower.
Obligations on lenders
| Area | Requirement |
|---|---|
| Third parties | Standard arrangements for sourcing, appraisal and valuation of gold |
| LTV ratio | Monitor continuously to avoid over-lending |
| Risk management | Apply borrower risk weights properly |
| Internal controls | Needed where gold handling or auctions are outsourced |
| Reporting | Corrective actions reported to RBI’s Senior Supervisory Manager within three months |
Significance
- Prevents undervaluation and unfair auctions that harm borrowers.
Exam angle
- Reserve price: 85% of 30-day average, 22 carat.
- Reporting deadline: three months.