RBI asks banks to let jewellers repay part of loans in physical gold

By

Isabelle Crossley

Published
Jun 24, 2021

On June 23, the Reserve Bank of India instructed banks to give gold jewellery manufacturers and exporters the option to repay part of their Gold Metal Loans in physical gold.

 
The RBI’s new instructions to designated banks participating in the Gold Monetisation Scheme and banks authorised to import gold will give jewellery businesses, which have taken gold loans more flexibility with repaying their debt. Gold Metal Loans are designed to be repaid in Indian rupees to the value of the gold borrowed from the bank and under the RBI’s new norms, part of the loans can now be repaid in gold itself, ET Bureau reported. 
 
“Banks shall provide an option to the borrower to repay a part of the GML in physical gold in lots of one kg or more,” read a RBI circular, the Press Trust of India reported. 

The new norms are, however, subject to certain conditions including that the the Gold Metal Loan must have been extended out of locally sourced or Gold Metal Loan-linked gold. The gold used towards the repayment of the loan must also be locally sourced India Good Delivery Standard or LBMA's Good Delivery Standards gold and it must be delivered to the bank directly by the gold refiner without the borrower’s involvement. 
 
Banks will continue to keep tabs on how Gold Metal Loan funds are used, the RBI said. The Gold Monetisation Scheme was first introduced in 2015 with the aim of encouraging movement of gold within India.