What changed
Previously, Gold (Metal) Loans were restricted to jewellery exporters only. Now, nominated banks authorized to import gold can also lend to domestic jewellery manufacturers who are not exporters, subject to a 90-day tenor and other conditions. Additionally, non-nominated banks can issue stand-by LCs or bank guarantees for these domestic jewellery manufacturers only, denominated in INR.
What it means for you
Banks can now tap a new borrower segment—domestic jewellery manufacturers—for gold loans, potentially expanding their lending portfolio. However, these loans must be carefully managed within the 25% Tier I capital ceiling for aggregate borrowing for non-export purposes, and banks must ensure strict end-use monitoring and KYC compliance. The 90-day limit and international gold interest linkage add operational discipline.
What you must do
- Update internal lending policies to include domestic jewellery manufacturers as eligible borrowers for Gold (Metal) Loans.
- Ensure gold loans to domestic manufacturers do not exceed 90 days and interest is linked to international gold rates.
- Monitor aggregate borrowing for non-export purposes to stay within the 25% Tier I capital ceiling.
- Implement robust end-use verification and KYC processes for these loans.
- For non-nominated banks issuing stand-by LCs/BGs, conduct thorough credit appraisal and maintain adequate margin against gold price volatility.
Who it affects
Nominated banks authorized to import gold, Non-nominated scheduled commercial banks issuing stand-by LCs/BGs, Domestic jewellery manufacturers (non-exporters), Jewellery exporters (existing arrangements unchanged)
How are these loans treated under capital adequacy norms?
They are subject to normal reserve requirements, capital adequacy, and other prudential norms, and count toward the 25% Tier I capital ceiling for aggregate borrowing for non-export purposes.