1.1 General: GOLD LOAN POLICY Loans may be given against pledge of gold ornaments wholly belonging to the applicant/borrower. This loan facility should be made available only to individuals. 1.2 Persons Eligible: Advances against gold ornaments should be confined to parties whose bonafides and reliability are established to the complete satisfaction of the bank/branch. Further, the loans should not be sanctioned to the appraisers or to the persons Introduced by the appraiser. He/She must be the true owner of the gold ornaments, which he/she wants to pledge to avail a loan. 1.3 Purpose: It is mostly for meeting Medical/Educational or any other family expenditure. At times it may be to clear prior debts. 1.4 Amount Eligible: The maximum loan amount shall be Rs 5.OO lakhs per individual. All the gold loans availed from the Bank by a particular individual should be less than or equal to the ceiling of Rs. 5.OO lakhs. 1.5 Period of Loan: The gold loan will have to be repaid together with Interest due, within 12 months from the date of availing the loan. 1.6 Rate of Interest: At present the rate of interest is variable as per scheme. However, the interest will be charged on monthly compounding basis. Penal interest at the rate of 2.00% p.a. will be charqed on overdue amount from the date of overdue. 1
The rate or Interest will be revised from time to time basing on the market conditions. The branches should follow the latest Circulars Issued by Head Office from time to time, 1. 7 Security: The gold ornaments of the borrower are the security for availing the loan. The valuation at the ornaments must be based on the net weight and fineness of gold content only. The net weight is arrived after excluding weight of precious/semi precious/imitation stones and threads contained in ornaments. It is not desirable to entertain gold ornaments With diamonds or equally valuable precious stones set in them. The weight of all extraneous materials such as wax/strings/fastenings as well as stones (precious or artificial) must be entirely ignored when ornaments containing them are entertained as cover, under pledge, for the loan. The rough estimate of the weight of such items should be more liberal i.e., on the high side so that the loan sanctioned will be adequately covered by the gold alone. 1.8 Associate Membership: The borrower should be admitted as an Associate/Nominal Member on Remittance of RS.100/- towards nominal share capital and RS.10/- towards admission fee. 1.9 Appraisal: Appraising of these ornaments will be done by Gold appraisers enqaqed bv the bank on commission basis. 1.10 Sanctioning Authority: The Asst General Manager/Manager at HO Banking, Branch Manager at branch, Gold Loans section at HO will be the sanctioning authority to sanction and disburse loans against pledge of gold ornaments. 2
1.11 Documentation: Gold loan application form duly filled and signed by the borrower, duly Introduced wherever the borrower is not a customer already. Residential proof of the borrower. Revenue stamp on the D.P. Note, duly discharged. Schedule of ornaments duly signed by the borrower. 1.12. Passport size Photo of the borrower. The documentation stipulated under KYC can be considered. Check List: a. Duly filled In application along with Introducer's signature. b. Duly discharged demand promissory note. c. Duly signed memorandum of securities by the appraiser. d. Duly signed schedule of ornaments by the borrower. 1.13 Fees and other Charges: The Branch at the time of sanctioning "Gold Loan" should collect "Appraiser Fee" from the borrower/staff at the rates in force along with "Associate membership Fee" and "admission fee, Service Tax, if any etc. as prescribed from time to time. If the borrower fails to take back the ornaments within 15 days after closure of the account he shall pay safe custody charges at the rate of RS.O.25 paise per month per Rs.100/- of the appraised value of the ornaments from the 16th day of closure of the account. The borrower shall pay RS.200/- towards penalty charges If he closes the account within one month of taking the loan. 3
1.14. Margin: Per gram rate at present is Rs.1700/-. The permissible per gram rate fixed by the Bank should be adhered to while arriving at the loan amount. The branches should follow the circulars issued by Head Office from time to time, in respect of per gram rate. 1.15. Operational Aspects: A. Loan Issue Procedure: The gold loan application cum letter of pledge with the Branch seal and date seal with Officer's initial to be given to the prospective borrower for filling up, and the concerned Loans Asst. has to guide the borrower whenever necessary. The Staff Assistant/officer who receives the filled in application should verify whether the required particulars/all columns have been properly filled up or furnished. Then the Borrower should deliver the gold ornaments to the Bank appraiser who should weigh them in gold balance provided in the branch, in the presence of the Asst General Manager/Manager. The appraiser should then record under appropriate column in the Memorandum of Securities Form, the gross weight of the ornaments pledged, the weight in grams to be deducted towards stones, wax, etc., and the net weight. The appraiser should also record therein the loan amount based on the net weight of gold ornaments pledged and the per gram rate of gold fixed by the bank from time to time. The Appraiser should prepare the Memorandum of Securities in triplicate. The Asst General Manager/Manager should then check the details of ornaments gross weight: net weight etc., and deliver the first 4
copy to the borrower against his acknowledgement, On the second copy titled "Schedule". The appraiser under the supervision of the officer place all the gold ornaments pledged by the borrower in a strong cloth bag, he should also place third copy of the memorandum, inside this bag and the second copy should be stapled to the loan application. The Asst General Manager/Manager should tie the Gold loan bag securely and should not allow the customers/appraiser to handle the ornament/bag once the gold appraisal is over. The Branch Manager should keep the bag in his personal custody, till it is kept in the Joint custody. The Staff Assistant attached to this section/ assigned this job should then prepare the following vouchers: Loan Voucher (Debit). Associate Membership & Admission fee. Appraiser fee. Service Tax Credit Voucher, if the loan amount is to be credited to party's account with the branch or cash voucher in case of cash payment. The officer should check the entries, in the Loan application and memorandum of securities i.e., the gross weight & net weight of the gold per gram rate at which loan has to be issued, the loan amount and then will sanction/record sanction in the application itself wherein specific space/column has been provided. He should pass the Loan Voucher. Cashier should either receive cash towards "Nominal Share Capital", "Admission fee" and "Appraiser's fees" and Service Tax also from the borrower or adjust these amounts out of the gold loan amount and pay the balance to the borrower. Cashier should affix "Cash received" stamp on "Nominal Share Capital", "Admission fee" & "Appraiser fees" and 'Service Tax' 5
vouchers and "cash paid" stamp on gold loan Debit Voucher and sign on all these vouchers. A separate "Nominal Members" register should be maintained by the concerned Staff Assistant in the following proforma. The membership number should be maintained. NOMINAL MEMBERS REGISTER Date Loan No Name of the Member with Initials address The section staff should feed all relevant particulars in the Gold Loan Master like Name of the borrower, Address, Full details of the gold ornaments pledged as recorded in the Memorandum of Securities which entries have been authenticated by the gold Appraiser. The gold ornaments pledged are tied together using a thread and the Tag card should be tied with this and the bag is then sealed with sealing wax in the presence of Joint custodians. Appraiser shall also sign on the sealed bag confirming Gold appraised are kept in bag Once the gold bag is closed, with ornaments inside and tag card is tied outside this bag, the Manager should affix bank's seal on the Red sealing wax poured on this knot. After the day's cash transactions are over, all the gold loan bags relating to gold loans issued that day should be arranged in gold trays in the order of the loan account numbers and the tray should be placed inside "gold safe" within the strong room, by both the joint custodians (Asst General Manager/Manager & Cashier). A separate register called "Gold Bags register" supplied by the Head Office should be maintained by the cashier. This register should be kept inside the gold safe and this should be signed by both the joint custodians on deposit or withdrawal of the bags from the safe. 6
All the Gold loan application forms containing Associate Membership Application Form, Pledge Agreement Form and Pronote should be maintained in a separate file by the concerned Staff Assistant and kept In Almirahs under lock and key. As and when the gold loans are closed (cleared) the relevant gold loan applications should be removed from the file and "Account closed" stamp should be affixed on the said form with date of closing the loan recorded. These forms of the closed accounts should be kept/retained in separate file called "gold loans closed" by the concerned Staff Assistant. B Safe Custody of Pledged Ornaments: The gold ornaments pledged with the Bank shall be kept in a separate Iron Safe (other than cash safe) which is also kept inside the strong room under Double Lock System, i.e., not only the Strong Room is under Double Lock System but also the Iron Safe or Steel cupboard. The ornaments under pledge to the bank should be under the Joint custody of the Branch Manager and another officer of the Branch or the Cashier of the branch. One set of keys of the iron safe in which the gold ornaments are stored should be with the Branch Manager while the 2"d set should be with the Cashier/Asst. who will be the joint custodian. C. At the time of Repayment: The concerned Staff Assistant of the section should calculate the Interest, other charges if any and prepare necessary vouchers and hand over to the borrower to enable him to remit the total amount in the cash counter. After payment by the borrower in full together with interest and other charges if Any, the vouchers should come to gold loan section. On receipt of the vouchers the following have to be done by the concerned Staff Assistant. 7
i) Enter appropriate closing entries in the gold loan account. ii) Withdraw the documents i.e., the loan application-cumpledge agreement submitted by the borrower at the time of availing the loan and cancel these forms drawing two parallel lines diagonally across these documents within which "Account Closed" should be written using red ink, record the date of closing the loan also in these forms. The Manager and the cashier should do the following: Withdraw the gold bag, relating to loan accounts closed from the gold safe. Make proper entries in gold bags Register duly Initialing at appropriate places (Security Register). c. The concerned Staff Assistant should keep all the above cancelled documents in a separate ring (box) file captioned as "Gold Loan Closed Accounts File" in a serial order of Gold Loan Nos. d. Borrower should surrender the Memorandum of Securities at the time of returning the ornaments after closing the gold loan account. As per the procedure detailed above it should also be properly cancelled and filed. The gold ornaments should be delivered by the Manager to the borrower after verifying tile signature and getting his acknowledgement at the appropriate places in the loan application and memorandum of securities and after due verification of the signature. e. Renewal of gold loans is permitted after payment of Interest on the same day as a onetime measure subject to the condition that the ornaments are reappraised at the time of renewal and the loan period in total does not extend beyond 24 months. 1.16 Overdue Loan - Recovery Procedure: a. Branch Manager should review all the gold loan accounts once in a month and instruct the concerned Staff Assistant to take the following actions for- the recovery of dues. 8
i. Issue first Demand Notice after 15 days from the due date giving 7 days time. ii. In case the borrower does not respond to the first Demand Notice, Issue 2nd demand notice after 15 days from the date of Issue of first notice, giving 7 days further time.. iii. In case there is no response even for the 2nd notice, issue final notice by registered post, after 15 days from the date of issue of 2nd notice, informing the borrower that in case the borrower does not pay the dues to the bank and close his gold loan account on or before (certain) date the bank will arrange for the sale of pledged ornaments through public auction. iv. In case there is no response even after the final demand notice or all such demand notices are returned undelivered to the bank, a responsible staff member of the bank may personally visit the last known address of the borrower to which address the bank had sent all the demand notices. In case the borrower is not available in that address, he should enquire with the neighbors to know the whereabouts of the borrower. v. All notices returned undelivered to the Branch should be kept unopened and must be kept in a separate file. So that it may be produced, if need be, as evidence of notice having been sent. Similarly all Acknowledgement cards shall be kept in that file. vi. Thereafter the Branch Managers shall fix auction date and inform the same to Head Office. Branch shall arrange for sale of gold ornaments relating to overdue gold loans through public auction the Branch should take the following steps: Prior to actual sale, the Bank will publish the proposed auction sale in one or two local dailies, preferably in local/vernacular language giving the details of the Name of the borrower with last known address. A copy of the public auction notice should be displayed in the Notice Board of the concerned Branch. 9
The auction should be conducted in the presence of a team of officers nominated by the Bank and full record of the auction should be kept by the Bank. Gold ornaments relating to each loan should be taken for auction separately. On the date of auction the intending bidders should remit an amount fixed by the bank as EMD and should furnish his name,residential address with phone, business address with phone, If any, and sign in the "participating bidder's List" of the Bank. He will then be given a TOKEN (as ID) by the Bank to participate in the auction sale. This EMD will be refunded against his acknowledgement in "Participating Bidders List". For each item of gold ornaments auctioned the Bank should record the bid amounts as the auction proceeds (i.e., as per progress in the auction) noting in a separate sheet for each gold loan account the ornaments relating to which are auctioned with the name of the bidder and the bid amount by him. The highest bidder should sign with the date in that particular sheet against the highest amount bid by him which should be countersigned by the concerned Manager. The bid amount is to be paid on the same day by the bidder. In case a borrower had pledged many pieces (items) of gold to avail the loan. Which has now become overdue, the Bank may auction only as many items of gold as are necessary to realize the entire dues under the said gold loan account and the remaining pieces (item) of gold ornaments should not be auctioned. - To be examined. ix. Care must be taken to see that the Bank realizes proper prices for the gold auctioned. If the Manager suspects that the bidders have formed a Syndicate and feels that the highest bid for a particular ornament is not a fair price, the sale of that gold need 10
not be concluded that day, but can be adjourned to some later date. x. The borrower should also be intimated of the auction sale particulars by registered post with acknowledgement due. All charges (postal charges relating to Demand and Registered notices sent to him etc.) should be adjusted out of auction sale proceeds after adjusting loan dues, balance amount of the sale proceeds, if any, should be credited to the borrower's SB account or remitted by means of a Banker's Cheque/Pay Order Crossed account payee. In case the auction sale proceeds is not sufficient to liquidate the dues under the gold loan account of the borrower the branch should initiate necessary legal action against the borrower for recovering the short fall. xi. The staff members of the Bank should not be allowed to participate in the auction sale. xii. All the overude cases put to auction shall be earmarked as NPAs in CBS to stop further recurring of interest on Overdue. xiii. During auction if the outstanding dues is not realized the following action shall be initiated; To dispose off the gold ornaments pledged as per market value as on date of sales, and balance outstanding dues to be recovered by filling arbitration before the DR OSD of the Bank for Attachment of Movables. If a borrower has more than one loan, the auction will be conducted to all loans accounts irrespective of due date and status of loan if required. The Branch Manager shall take personal responsibility in ensuring full recovery of overdues by way of auctioning and filling 11
1.17 loans to Staff Members: Gold loan can be granted to the members of the staff subject to the limits fixed by the HO from time to time. At present the limit is RS.5.00 lakhs per employee. The rules to be followed, rate of interest to be charged appraiser charges etc., as communicated by HO from time to time through circulars/office orders have to be followed. The pledged ornaments should be owned by the staff member. If the loans availed by staff become overdue, the commercial rate of interest shall be charged and salary shall be attached An employee can avail loan only at the place of working. Precautions: Photo of the loanee should obtained. Ensure filling of all columns in the application Obtain proper/authenticated introduction of the loanee. Phone numbers both office and residence should be obtained. DONTs Do not sanction loan with out appraiser s valuation. Do not sanction gold loans to totally to strange persons. Do not sanction loans to appraiser or the persons introduced by the appraiser. Do not sanction loan beyond the ceiling limit. Do not sanction the amount in excess of the par gram rate. Do not accept pearls, stones for the purpose of loan. Do not accept gold biscuits or coins for sanction of loan. Be sure of the gross weight.deduct the weight of the beeds etc. Latest address proof should be obtained. 12
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