RBI's New Guidelines to Standardize Gold Loan Practices

The Reserve Bank of India (RBI) unveiled draft guidelines for gold loans to protect borrowers. These include standardized documentation and procedures for assessing gold purity and weight. Lenders must communicate clearly with borrowers to ensure transparency, and essential terms should be explained to illiterate customers in the presence of a witness.

The Reserve Bank of India (RBI) has issued draft guidelines aimed at enhancing prudential norms and ensuring ethical conduct in the gold loan sector. This move is targeted toward safeguarding the interests of borrowers.

The guidelines call for uniform documentation and procedures across all lender branches to assess the purity and weight of gold collateral. Lenders are expected to display these detailed procedures on their websites for customer information.

It also mandates lenders to involve borrowers during the collateral assessment and to explain all deductions. Moreover, communication with borrowers must be in a language they understand, with crucial terms explained to illiterate customers in the presence of a witness, thereby enhancing transparency and understanding.

(With inputs from agencies.)