What changed
RBI restricted advances against specially minted gold coins sold by banks to a maximum of 50 grams per customer, aligning with the May 2013 monetary policy. It also clarified that the existing prohibition on loans against gold bullion applies to units of gold ETFs and gold mutual funds, as these are backed by bullion.
What it means for you
RRBs must now enforce a per-customer weight cap of 50 grams for gold coin loans, preventing circumvention of the bullion loan ban through heavy coins. The extension to ETFs and gold mutual funds closes a potential loophole, meaning RRBs cannot lend against these instruments. Loan limits for gold ornaments, jewellery, and coins (up to 50 gm) remain subject to board-approved limits.
What you must do
- Update loan policy to cap gold coin advances at 50 grams per customer.
- Ensure no new loans are sanctioned against units of gold ETFs or gold mutual funds.
- Review existing gold loan portfolios to identify and rectify any exposures exceeding the 50 gm coin limit or involving prohibited instruments.
- Communicate the revised guidelines to all branches and credit officers immediately.
Who it affects
Regional Rural Banks (RRBs), RRB customers seeking gold loans, Gold loan officers and credit departments at RRBs
Does this circular affect loans against gold ornaments and jewellery?
No. Loans against gold ornaments and jewellery remain permitted under board-approved policies, as per the 1994 circular. Only advances against gold coins are now capped at 50 grams per customer.
Can we still lend against gold ETFs or gold mutual funds?
No. The circular clarifies that the restriction on loans against gold bullion (from 1978) applies to units of gold ETFs and gold mutual funds, so such advances are not allowed.
What is the limit for loans against gold coins weighing up to 50 grams?
The loan amount against gold coins (up to 50 gm per customer), along with loans against gold ornaments and jewellery, must be within the board-approved limit set by the RRB.