Key Points
The finance ministry ordered state-run banks to review gold loan processes amid fears about risky debt given a rally in prices of the metal, said people familiar with the matter..
In a February 27 letter to all PSU bank chiefs, the department of financial services (DFS), part of the finance ministry, has asked banks to review every gold loan account since January 1, 2022, assess the collateral value, analyse collection charges and check if there has been any evergreening...
Concerns have been raised "regarding the disbursement of gold loans without requisite gold collateral, anomalies observed in collection of fees and of interest applied to the gold-loan accounts and closure of the account either on the same day or within a few days of disbursement, at times by repayment in cash," the finance ministry said in the letter, which ET has reviewed..
In the letter, the DFS asked banks to audit the gold loan portfolio, including accounts disbursed and closed in the last two years (January 2022 to January 2024)..
Concerned over evergreening of gold loans, the finance ministry has asked banks to analyse the collection of charges such as processing fees and interest applied..
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