Mumbai: A recent notification from the Reserve Bank of India has allowed jewellers, mostly exporters, to repay a part of their Gold loans in physical gold. The RBI announced the directive for banks to enable jewellery exporters and domestic manufacturers.
According to current rules, authorized banks and designated banks participating in the Gold Monetization scheme can extend the GML measures to exporters or domestic jewellery manufacturers.
The RBI while revising the norms said, "banks shall provide an option to the borrower to repay a part of the GML in physical gold in lots of one kg or more, subject to certain conditions".
According to the circular, one condition is GML to be extended out of locally sourced or GMS-linked gold. Also, the repayment had to be made using locally sourced IGDS (India Good Delivery Standard)/ LGDS (LBMA's Good Delivery Standards) gold. And, the yellow metal has to be delivered on behalf of the borrower to the bank directly by the refiner or a central agency without the borrower's involvement.
Another condition is that the loan agreement should contains details of the option to be exercised by the borrower, acceptable standards and manner of delivery of gold for repayment.
RBI also asked banks to suitably incorporate all aspects into the board-approved policy governing GML along with concomitant risk management measures.
RBI added that the banks shall also continue to monitor the end-use of funds lent under GML.
The Gold monetisation scheme commenced in 2015 as a measure to mobilize the yellow metal held by households and institutions across the country.