NEW DELHI: With a view to curb appetite for gold, banks are sanctioning advances, including personal loans, only if borrowers agree not to use the proceeds to buy the metal beyond permitted levels.
Banks have placed the condition that borrowers should not use even personal loans to buy gold, a senior official of a private sector bank said.
The measures follow directions from the Reserve Bank of India to banks and NBFCs that are aimed at reining in demand for the yellow metal. The RBI and the government have taken steps to curb demand for gold after imports of the metal widened the current account deficit.
As per existing guidelines, no advances can be granted by banks for the purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold exchange traded funds and units of gold mutual funds.
For advances against the security of specially minted gold coins sold by banks, the RBI has directed that the weight of the coins should not exceed 50 grams per customer, according to a senior public bank official.
It further stipulated that nominated banks, agencies and other entities should make gold available for domestic use only to entities engaged in the jewellery business, bullion dealers and banks authorised to administer the gold deposit scheme against whole upfront payment.
Full article: Banks approving loans on condition borrowers don’t buy gold (The Economic Times)