Page 12 - Banking Finance July 2021

RBI CORNER

RBI allows jewellers to the loan agreement should contain leader in certain areas while it is
details of the options that can be evolving.
repay part of gold loan exercised by the borrower. It should
with physical gold also include details of acceptable RBI imposes monetary
The Reserve Bank of India released a standards and manner in which the penalty of Rs.2-4 lakh on
notification stating that jewellery gold had to be delivered for
exporters and domestic repayment of GML. three co-operative banks
manufacturers of gold jewellery now for non-compliance
have the option of replaying a part of RBI Dy Guv asks Industry
The Reserve Bank of India have
their Gold (Metal) Loans (GML) using to make pricing of imposed monetary policy on three co-
actual physical gold.
financial products operative banks due to non-
According to existing instructions, compliance. These three banks are -
banks who are authorised to import transparent Excellent Co-operative Bank, Janseva
gold and designated banks
RBI Deputy Governor T Rabi Sankar Sahakari Bank Limited and The Ajara
participating in Gold Monetisation urged the industry to make the Urban Co-operative Bank Ltd.
Scheme, 2015 (GMS) can give out pricing of financial products and
GML to jewellery exporters or services transparent to minimise RBI imposed a monetary penalty of
domestic manufacturers of gold chances of mis-selling. Rs.4 lakh on Excellent Co-operative
jewellery. The GML was only allowed Bank Ltd., Mumbai (the bank) for
to be repaid in the Indian currency Speaking at an event he said there is contravention of the directions issued
(Rupees) which was to be equivalent an amount of pricing even in the case by RBI on 'Maintenance of Deposit
to the value of gold that had been of free services. Accounts' and 'Know Your Customer
borrowed. However, RBI has now Citing an example of such opaque (KYC)'.
reviewed and made changes to these arrangement, Sankar said bundling of RBI monetary penalty of Rs.2 lakh on
norms. products in the financial sector is one Janseva Sahakari Bank Limited, Pune
"Banks shall provide an option to the such arrangement. (the bank) for contravention of the
direction issued by RBI on Know Your
borrower to repay a part of the GML Bundling tends to favour a seller of
in physical gold in lots of one kg or such a product rather than consumer, Customer (KYC).
more," noted the RBI circular issued. he said, adding "when bundling and The Reserve Bank of India (RBI) has
The option of repaying GML through such issues come up, I think regulators imposed, by an order dated June 23,
physical gold will be subject to certain need to be more alert to the 2021, a monetary penalty of Rs. 2
conditions. lakh (Rupees Two lakh only) on The
possibilities of mis-selling and misuse".
On such condition is that the GML Ajara Urban Co-operative Bank Ltd.,
should have been extended out of The deputy governor made a Ajara, Kolhapur (the bank) for
locally sourced or GMS-linked gold. disclaimer that the remarks made by contravention of direction issued by
RBI noted that the repayment of him are personal and not of the RBI the RBI on 'Maintenance of Deposit
GML has to be done using locally in the interest of free and fair debate Accounts'.
sourced IGDS (India Good Delivery related to investor education and This penalty has been imposed taking
Standard)/ LGDS (LBMA's Good protection in the banking sector. into account the failure of the bank to
Delivery Standards) gold. The bank "Industry also needs to make pricing adhere to the aforesaid direction
added that the gold has to be transparent whenever you price your issued by THE RBI.
delivered on behalf of the borrower services and keep the pricing distinct The above-mentioned penalties is
to the lender directly by the refiner or among multiple services that you are based on deficiencies in regulatory
a central agency without any selling," he said. compliance and is not intended to
involvement from the borrower.
Observing that the digital payments pronounce upon the validity of any
Another condition for loan industry is yet to enter into its teens, transaction or agreement entered
replacement using physical gold is that Sankar said it has become a global into by the bank with its customers. T

12 | 2021 | JULY | BANKING FINANCE