repayment of gold (metal) loans

RBI has vide its circular dated 23rd June, 2021 advised some changes in the repayment of gold (metal) loans (GML) which was extended to jewellery exporters or domestic manufacturers of gold jewellery. These loans are normally repaid in the Indian rupee equivalent of the borrowed loan amount on the relevant dates.

Now RBI has decided that Banks shall provide an option to the borrower to repay a part of the GML in physical gold in lots of one kg or more, provided:

  1. the GML has been extended out of locally sourced / GMS-linked gold;
  2. repayment is made using locally sourced IGDS (India Good Delivery Standard)/ LGDS (LBMA’s Good Delivery Standards) gold;
  3. gold is delivered on behalf of the borrower to the bank directly by the refiner or a central agency, acceptable to the bank, without the borrower’s involvement;
  4. the loan agreement contains details of the option to be exercised by the borrower, acceptable standards and manner of delivery of gold for repayment;
  5. the borrower is apprised upfront, in a transparent manner, of the implications of exercising the option.

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