The Reserve Bank of India Circular on Gold Loan Repayment[i]  

The Reserve Bank of India recently through its circular dated June 23, 2021 states that the jewellery exporters and domestic manufacturers of gold jewellery can now have the option of repaying a part of their Gold (Metal) Loans (GML) using actual physical gold. Earlier according to the existing instructions, banks who are authorised to import gold and designated banks participating in gold monetisation scheme, 2015 (GMS) can give out GML to jewellery exporters or domestic manufacturers of gold jewellery.The notification says that the gold metal loans can be re-paid in physical gold as well. As per the notification, banks can provide the option to the borrower to repay part of the gold metal loan in physical gold as well. RBI clarified that banks shall provide an option to the borrower to repay a part of loan in physical gold in lots of one kg or more with the conditions:-

• The gold metal loans has been extended out of locally sourced;
• Repayment is made using locally sourced IGDS (i.e India Good Delivery Standards) or LGDS (i.e LBMA’s Good Delivery Standards) gold;
• Gold is delivered on behalf of the borrower to the bank directly by the refiner or central agency, without borrower’s involvement
• The loan agreement contains details of the option to be exercised by the borrower, acceptable standard and manner of delivery of gold repayment
• The borrower is apprised upfront, in a transparent manner, of the implications of exercising the option.[ii]

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.

[i] The Reserve Bank of India, Gold metal loan-repayment, Also available: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12117&Mode=0

[ii] https://www.newindianexpress.com/business/2021/jun/24/jewellers-can-now-repay-part-of-gold-loan-in-physical-form-2320825.html