Gold Loan Processing Regulations Quiz

Asset Product - Gold Loan

• Purpose: A general-purpose loan for individuals secured by gold ornaments or specially-minted gold coins. This is not a speculative loan.
• SBI Realty Gold Loan: Offered for specified requirements within a housing loan, such as margin money, registration charges, and project escalation. Gold ornaments and coins sold by banks can be pledged.
• Important Note: 24-carat gold bars and biscuits are not eligible for loan security. The total weight of gold coins pledged cannot exceed 50 grams per customer.
• Eligibility Criteria (General): Individuals aged 18 or above, with a steady income source (including bank employees and pensioners). Proof of income is mandatory. KYC compliance is required. The borrower must demonstrate the ability to repay the loan (EMI service capability). The borrower must achieve a score of 40 or above in a risk-scoring model (RSM). Declaration from the borrower about ownership of the offered ornaments.
• Eligibility Criteria (Realty Gold Loan): Meets the general criteria above and also needs a housing loan with SBI (both new and existing loans), and the capacity to service the EMI

Income Tax Benefit (SBI Realty Gold Loan Variants)

• Section 24(b): Interest benefits are available. Details of the benefits are provided in the document under the "Income Tax Benefit" section.

Product Variants

• SBI Personal Gold Loan: Varies by repayment structure (3, 6, 12 months) or based on EMI. The option of bullet repayment is also available. Realty loans also have the option of bullet repayment (3, 6, or 12 months), or EMI based. Top up Gold Loan also is available.
• Agri Gold Loan: Options include MC-KCC-Gold Loan for Agri Product, and a Multi-Purpose Agri Gold Loan Scheme with specific codes.
• SME Gold Loan: Minimum loan amount exceeding Rs 1 lakh, maximum loan of Rs 20 lakhs

Loan Amount

• Minimum: Rs 20,000 (or Rs 10,000 for top-up, and Rs 50,000 for realty loans)
• Maximum: Rs 50,00,000 per customer (total across multiple loan accounts)

Market Value and Advance Value of Gold

• The Market and Advance Value of different karat purities of gold are updated monthly.

Quantum of Advance

• Advance amounts are based on monthly gold price listings for 18/22/24-carat gold. Assessment of the gold's purity is assessed at the time of loan sanction.

Margin

• Different margin rates are available based on the loan type and duration. Minimum margin rate is 25%, however, various loan variants have slightly different rates

Repayment Period

• Repayment periods are dependent on the type of Gold Loan (3 months, 6 months, 12 months or EMI-based, Top-Up etc.)

Advances to Staff (Demand Loan)

• Loans for medical/educational expenses/marriage of dependents or for housing purposes are repaid through 60 or 100 monthly installments, respectively (inclusive of interest).

Photographs of Ornaments

• A photograph of all gold ornaments offered as security is taken during processing and signed by the borrower and custodians. A printed copy is kept with the documents; the photograph should be large enough for clarity.

Valuation of Gold Ornaments

• The valuation depends on the type of loan and the exposure amount; however, different criteria are applied based on the amount, and branches will choose different appraisers for specified amounts (Rs 50,000 and above).

Custody of Gold Ornaments

• Gold ornaments are kept in the strong room under the joint custody of the branch manager, accountant, and branch cash officer.

Delivery of Ornaments

• Ornaments are returned to the borrower upon loan repayment, with proper acknowledgement. Exceptions are made for loan accounts that are closed if the ornaments are kept in the safe deposit under officer in-charge and custodians.

Calling Up of Advance

• Rules are outlined (in the event of increase / decrease in gold market rates) for revising advance value accordingly.

Product Variants Under Personal Gold Loan Scheme

• Short-term loans (3 months, 6 months, 12 months) with interest and principal repaid at the end of the term.

Custody of Gold Ornaments Pledged

• Gold ornaments should be stored in a strong room, with joint custody.

Surprise Verification

• Branches conduct surprise inspections of gold ornaments to maintain security.

Various Gold Testing Methods

• Different methods such as touchstone, nitric acid, specific gravity test, or using gold assaying machines (Karatometers) are used to assess the gold's purity.

Gold Loan Documentation

• Required documents include applications, appraisals, acknowledgments, and witness letters (for illiterate borrowers).

Disbursement

• Loan amounts are disbursed into the borrower's bank accounts, not in cash, and KCC accounts are excluded.

Service Area

• Borrowers are required to reside within 25-30 km of the branch.

Surprise Verification

• For fraud prevention, branches do surprise checks of gold holdings.

Spurt in Agri Gold Loan Portfolio

• Checks/verification are carried out to maintain quality and value of pledged gold ornaments.

Gold Loan Release Letter Acknowledgment

• Generated at the opening of the gold loan and stored with documents, including borrower's or client's acknowledgment.

Loan to Value

• LTV ratio of 75% must be maintained (as long as the loan tenure lasts) and interest is charged monthly but due at EOT.

Assessment and Security Valuation

• Gold appraisers are part of verification for loans above Rs 50,000.

Purity Testing

• Procedures exist to test the purity of gold (touchstone, nitric acid, and specific gravity).

Documentation

• Procedures specify documentation requirements (applications, appraisals, acknowledgments, etc.).

Penal Charges

• Rules for penal charges and pre-payment penalties are outlined, as is the process for handling overdue accounts.

Gold Appraiser Charges

• An outlined range of fees for pre-payment penalties exists.

Other Conditions

• Terms on post-sanction visits are outlined and interest subvention procedures are described.