Gold Loan Policy by TSCAB | TSCAB
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Gold Loan Policy by TSCAB

TELANGANA STATE COOP. APEX BANK LTD., HYDERABAD

L&A DEPARTMENT

Gold Loans Policy to DCCBs (Non-agriculture) for 2017-18

1) Purpose of the loan:
The limit sanctioned is as refinance to DCCBs for the Gold Loans disbursed/lent by them through their branches against security & pledge of gold ornaments/jewelry to the individuals as short term loan (gold loan) for various priority sector activities.
  
2) Eligibility for refinance and compliance with the exposure norms by NABARD:

All DCCBs are eligible for refinance against the security of gold/ornaments/jewelry directly disbursed by the Branches of DCCBs subject to compliance with exposure norms stipulated by TSCAB/NABARD/RBI.
 
3) Quantum of Refinance:

Refinance is available up to a maximum of 70% of the latest non-overdue gold loan outstandings and drawals will be allowed subject to availability of margin in the sanctioned limit.

The DCCBs may work out lending program for the year 2017-18 and in case of need may approach TSCAB for fresh/additional allocation, as the case may be, after exhausting the allocation already made duly submitting the application in the prescribed format supported by the Board Resolution and specific request.
 
4) Validity period:

The limits are sanctioned for the financial year 2017-18 i.e., valid upto 31st March, 2018, subject to furnishing of request/application with all necessary documentation.
 
5) Rate of Interest:

The interest charged on refinance to the DCCB will be as follows:

1

TSCAB to DCCB The Present rate of interest is 9.75% and is subject to change from time to time. Interest will be charged at monthly rests. In case of default, penal interest @ 2.00% p.a. will be charged on the defaulted amount for the period of default, over and above the normal rate.

2

DCCBs to Borrower

Rate of Int. to be charged is to be decided by the DCCB. DCCB shall charge interest on monthly basis by duly following the RBI circular No. RPCD.RF.BC.No.69/07.37.02/ 2002-03, Dt: 31.1.2003.

The monthly interest charged on the refinance to the DCC Banks will be recovered within 10 days from the end of each month by way of debit to the Current A/c of DCC Bank.
 
6) Security:

The DCCB shall create charge and assign the jewels / gold pledged by its borrowers in favour of TSCAB with the right to physical possession and sale in the event of default in repayment by the DCCB.
 
7) Individual Maximum loan:

Maximum limit of Rs.10.00 lakhs per individual subject to the per gram rate as fixed by the DCCB, not exceeding 60% of the market value of the gold. The procedure for working out the per gram rate was communicated by Bank vide Circular No. Adv/IF/Non-Agrl.GL/2011-12, dt:28.9.2011.

Loans shall be sanctioned only against gold ornaments/jewellery and no advance shall be given against gold in the form of biscuits/coins (bullion). For assessing the net value of Gold, the weight of stones, pearls or beads, thread if any shall be reduced from the gross weight of the gold ornaments/jewellery to be pledged by the borrower.

The DCC Bank should prescribe a minimum margin to be maintained in case of gold loans up to Rs.1.00 lakh where bullet payments are permitted and accordingly fix the loan limit taking into account the market value for the security (gold/gold ornament) expected price fluctuations, interest that will accrue during the tenure of the loan etc., (Ref: RBI Circular No.RPCD. CO.RF.BC. No. 60/07.37.02/2009-10, dt:5.3.2010)
 
8) Passing on of recoveries:

All the recoveries should be passed on to the loan account regularly. Drawals will be allowed as per the eligibility based on the gold loan disbursements at ground level and by observing the gold loan NODC.
 
9) Insurance of gold ornaments:

The gold ornaments are to be insured for full value by DCCBs under Bankers Blanket Insurance Policy.
 
10) Auction of gold ornaments in case of overdue:

DCCBs shall maintain a due date diary for the gold loans issued, to pursue with the borrowers before the loan becomes overdue.

The auction process should be completed in respect of all overdue loans within a maximum period of 3 months of default of interest or principal, duly following the procedure of giving notices, paper notification etc. Detailed guidelines on conduct of auction of ornaments pledged in respect of overdue gold loans were already communicated by Bank vide Circular No. IF/Non-Agrl.GL/2011-12, dt:15.3.2012.

Overdue gold loans position should be informed to TSCAB on quarterly basis.
 
11) Documentation:

The drawals will allowed to the DCCB after executing the following documents by the DCCB and also basing on the hypothecation of receivables/jewellery pledged to DCCB:

Initial documents:

    1. Application for the limit.
    2. Letter of Acceptance of the terms and conditions of the facility.
    3. Resolution of the Board of Management of the DCCB.
    4. Loan agreement cum Hypothecation Deed.
    5. D.P. Note for sanctioned limit
    6. Deed of charge and assignment
    7. Letter of continuity.
    8. Copy of insurance policy obtained for the purpose.
    9. Certificate indicating that loans against to the customers are sanctioned as per RBI guidelines.

Documents to be furnished while availing the drawal:

  1. Drawal Application
  2. Letter of acceptance of Terms &conditions prescribed by TSCAB
  3. Report of the verification of gold ornaments
  4. Letter of continuity
  5. Period wise overdues
  6. Branch wise outstandings and overdues
  7. Certificate of NODC
  8. D.P. Note for drawal amount
  9. Report of the 100% verification of gold ornaments at HO/Branches indicating the number and names of branches in which verification is completed for the quarter prior to availing of drawal.( Annexure-V)
  10. Certificates of Reserve borrowing power, coverage of insurance, infrastructural facility, per individual limit, gold loans disbursements & outstanding, drawals in accordance with TSCAB/NABARD guidelines.

 
12) Monitoring:

Regular and surprise verification of gold ornaments bags has to be taken up by the DCCB on monthly basis through its Nodal/ Inspecting/ Senior Officers of the Bank. Further, cross verification of gold ornaments by appraiser of another branch in the presence of Branch Manager/Senior Officer, appraiser of the Branch concerned is to be done at quarterly intervals. As advised by NABARD, 100% verification of Jewels pledged with the Bank shall be conducted at regular intervals.

A verification mechanism was provided to DCCBs with a request to put in place the similar mechanism in their banks.

Accordingly, the Bank should review the verification reports furnished by the Verification Officers regularly and take necessary action wherever required. A copy of the periodical review should be furnished to TSCAB.
 
13) Appointment of Appraiser:

Gold loan appraiser may be appointed after due verification of credentials of the person and security deposit and other collateral security shall be obtained from the appraiser by the DCCB. Detailed guidelines and procedure to be followed were communicated vide Circular No.1/IF/GL to CCBs(Non-Agri)/2012-13, dt:09.05.2012.
 
14) Appraisal of gold loan:

Appraising of gold jewels should be done by an approved valuer of Gold engaged by the DCCB, in the presence of Bank officials. The gold ornaments pledged with the DCCB shall be sealed in the presence of the joint custodians and the appraiser and kept in the Defender safe, under the joint custody of two authorized officers of Bank.
 
15) Other terms and conditions:

  1. The limit shall be strictly utilized for the purpose for which it is sanctioned.
  1. The credit limit sanctioned is in the nature of cash credit accommodation and the DCC Bank may draw and repay as many times as required provided the outstandings in the account do not exceed the limit sanctioned, subject to compliance with NODC and exposure norms.
  1. Advances made under this facility are repayable on demand to TSCAB without prejudice to its right to recall the advances at any time, but may not ordinarily exercise this right for a period of 12 months from the date of each drawal.
  1. In the event of default by the DCCB, the TSCAB reserves the right to debit the DCCB’s current account and adjust the same to the dues.
  1. The TSCAB will have right to foreclose/recall the loans sanctioned in the event of non-compliance/violation of any of the conditions stipulated with this sanction.
  1. A separate NODC is to be maintained for this line of credit. The DCC Bank should also submit monthly NODC in the format prescribed by 5th of succeeding month to which the return relates. The DCCB should submit latest NODC for gold loans, other than that made for Agricultural purposes, along with each drawal.
  1. The DCCB should pass on the recoveries received on the gold loan accounts to TSCAB on then and there basis and prefer refinance drawals to TSCAB as per the requirement of the DCCB subject to NODC.
  1. The limit sanctioned is subject to revision, depending on the utilization of the limits and further application / request received from the DCCB.
  1. TSCAB would have the right to cause inspection and verification of the gold ornaments pledged by DCCB at any time during the currency of loan.
  1. Monthly progress report in the prescribed proforma shall be furnished by 5th of subsequent month to which the return relates.
  1. CMA returns on quarterly basis in the prescribed proforma shall be furnished within 10 days from the end of each quarter.
  1. To enable TSCAB to review the position of advances made by the DCCB’s under the gold loans comprehensively, a report in the enclosed format (Annexure-III) shall be furnished by the DCC Banks on quarterly basis within 10 days after the end of the quarter.
  1. TSCAB shall have the powers to alter/add/modify any terms and conditions as required from time to time.

 
16. Guidelines to DCCBs:

The DCC Banks are required to comply with the exposure norms stipulated by NABARD vide circular No. NB.DOS.CMA/768/ A.75/2008-09 dt:12.5.2008, the unit-wise and sector-wise exposure limits shall be as under:

 

Inspection

rating

Unit-wise exposure

as % to Capital funds

Sector-wise exposure

as % to Lendable resources

A

60

50

B

50

40

C

45

35

D

40

30

The unit-wise exposure norms is linked to capital funds while sector-wise norms to the lendable resources as on 31st March of the latest audited balance sheet of the Bank, based on the rating of banks given by NABARD after the inspection of banks conducted. The sector-wise exposure limit shall be strictly complied with by all DCCBs, irrespective of drawing of refinance.

  1. The DCCBs have to strictly comply with the KYC norms for all the gold loan borrowers. It is advised that loans be sanctioned to individuals having KYC compliant SB Accounts or SB account fully KYC compliant be opened before sanctioning Gold loans to individuals. The operation on the gold loan account i.e., the drawals and repayments, any in cash be routed only through the SB account of the Gold loan borrower. The DCC Banks and its branches should obtain KYC compliance as per requirement i.e., ID proof, address proof, recent photograph for opening the Account(s). The documents obtained from the borrowers be thoroughly examined with reference to the data available therein and their validity/sanctity or otherwise etc.,
    In case where a pre-existing SB A/c of the borrower is available, then it has to be ensured that the said SB A/c is KYC compliant in all respects.

  1. It is advised to obtain nomination from the borrowers without fail. In case the borrower does not exercise the option for nomination, the same may be obtained as “Not required” under the signature of the borrower.
  1. Guidelines issued by Bank through circular Bkg/BRCC/Gold Loans Gen. policy. DCCBs/09-10 dated 11.6.2009 on packing/ storing of gold ornaments should be followed.
  1. The interest on gold loans sanctioned above Rs.2.00 lakhs is to be collected on monthly basis and the outstanding should not exceed the gold loan sanctioned to the borrower. However, for loans upto Rs.2.00 lakh Bullet repayments of gold loans of one year as per RBI circular dated 08.01.2015 are permitted. Further, the RBI has prescribed loan to value(LTV) to the Cooperative Banks through circular No. DCBR.CO.BPD(RCB). Cir.No 11/13.05.001/2014-15 dt:08.01.2015.
  1. A brief list of precautions to be taken to establish the identity of the borrower of Gold loan etc. is enclosed for guidance to the DCC Banks.

Sd/-

MANAGING DIRECTOR