Reference is again invited to DNBS.CC.PD.No.266/03.10.01/2011-12 dated March 26, 2012 by which NBFCs were directed inter alia to have Board approved policies on auction of gold jewellery that are transparent to the borrower and adequate prior notice has been issued to her/him. The following additional stipulations are made with respect to auctioning of pledged gold jewellery:
- The auction should be conducted in the same town or taluka in which the branch that has extended the loan is located.
- While auctioning the gold the NBFC should declare a reserve price for the pledged ornaments. The reserve price for the pledged ornaments should not be less than 85% of the previous 30 day average closing price of 22 carat gold as declared by The Bombay Bullion Association Ltd. (BBA) and value of the jewellery of lower purity in terms of carats should be proportionately reduced.
- It will be mandatory on the part of the NBFCs to provide full details of the value fetched in the auction and the outstanding dues adjusted and any amount over and above the loan outstanding should be payable to the borrower.
- NBFCs must disclose in their annual reports the details of the auctions conducted during the financial year including the number of loan accounts, outstanding amounts, value fetched and whether any of its sister concerns participated in the auction.
Other Instructions
- NBFCs financing against the collateral of gold must insist on a copy of the PAN Card of the borrower for all transaction above `5 lakhs.
- High value loans of one lakh and above must only be disbursed by cheque.
- Documentation across all branches must be standardized.
- NBFCs shall not issue misleading advertisements like claiming the availability of loans in a matter of 2-3 minutes.
