What changed
New definitions for GML, GMS‑linked GML and import‑linked GML have been inserted. The existing Chapter V on GML is removed and a fresh Chapter V(A) is introduced, outlining eligibility of nominated import banks and designated GMS banks, and prescribing risk‑management requirements. The guidelines now mandate daily valuation of gold exposure using LBMA prices and the USD/INR rate.
What it means for you
Commercial banks will have to revise their GML lending frameworks to incorporate the two loan types and the associated borrower categories. All GML exposures will be treated like any other loan for capital adequacy, with daily market‑based valuation, and banks must ensure no liability passes to the gold source. Ongoing monitoring of loan size and gold end‑use becomes mandatory.
What you must do
- Update the bank's GML policy to reflect the new definitions, borrower eligibility and quantitative limits.
- Implement a system to value GML daily using LBMA gold price and the prevailing USD‑INR rate.
- Apply standard capital adequacy and prudential norms to GML exposures.
- Establish continuous monitoring of exposure levels and the actual use of the gold lent.
- Verify that repayment terms (cash, gold or mix) align with the defined loan category.
Who it affects
Commercial banks, Designated Gold Monetisation Scheme banks, Nominated import‑linked banks, Jewellery sector borrowers, MMTC Limited (for India Gold Coins)
What are the two categories of Gold Metal Loans now defined?
GMS‑linked GML, extended by banks under the Gold Monetisation Scheme using deposited or borrowed gold, with repayment possible in gold, cash or both; and import‑linked GML, extended by banks authorized to import gold, with repayment required in cash.
How must banks value Gold Metal Loans?
Banks must value the gold quantity daily by converting it to Indian rupees using the LBMA gold price in USD and the current USD‑INR reference rate.
Are borrowers liable to the overseas gold supplier or the gold deposit holder?
No. The guidelines expressly exclude any direct or indirect liability of the borrower towards the source of the gold.