Seeking to keep the demand for gold under check, the Reserve Bank of India has tightened the norms for loans against gold jewellery. “In order to standardise the valuation and make it more transparent to the borrower, it has been decided that gold jewellery accepted as collateral will have to be valued at the average of the closing price of 22 carat gold for the preceding 30 days as quoted by the Bombay Bullion Association (BBA),” RBI said in a notification.
No standard method
Currently, there is no standard method for arriving at the value of gold accepted as collateral and the valuation is arbitrary and opaque. While accepting the gold as collateral, the NBFC should give in writing to the borrower, on their letterhead giving the purity (in terms of carats) and weight of gold, it said. If the gold is of purity less than 22 carat, the NBFC should translate the collateral into 22 carat and state the exact grams of the collateral. In other words, jewellery of lower purity of gold shall be valued proportionately.
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