The Association of Gold Loan Companies (India) started a facility to sell pledged gold assets through a public auction. This is done after such gold loans become NPA to enable financial institutions to recover a loan in the event a borrower fails to pay this debt.
In this regard, willing gold loan applicants must know the complete process of a gold auction in India. Continue reading to know more about this auction.
Regulations regarding gold auction
A qualified and impartial auctioneer chosen by the financial institution must carry out this process in accordance with gold loan auction rules. Additionally, this procedure requires the Board’s approval, and the lender should not take part in such an auction.
- In accordance with policies, an auctioneer must give a borrower 21 days’ notice before holding an auction. Additionally, an auctioneer must mail this notice via registered mail.
- At least two regional newspapers must run an auction advertisement. Additionally, an auctioneer must ensure that an advertisement is placed in a publication using the borrower’s native language and another in any national daily newspaper.
A borrower can release his or her gold asset by paying the whole outstanding gold loan amount till the previous working day of the auction’s date. Nevertheless, a borrower must make this payment during the lender’s business hours.
Regulations regarding price
Specific regulations pertaining to the cost, adornment quality, and rates have been adopted by Association of Gold Loan Companies (India). These are as follows:
- Any pledged ornament that satisfies all quality requirements may be auctioned off at a price that is close to or equivalent to the gold’s current market price (on the specific auction day).
- Unless the responsible authorities notice a falling trend in the gold market, any bid coming in at a significant discount to the going rate will not be accepted. Otherwise, the highest bidder will be the winner of this auction.
- You have the right to take part in this bid as a borrower. For each auction, you will need to provide a certain deposit that an auctioneer will determine.
- According to the protocol for a gold loan auction, complete records of this auction must be kept and preserved. These records must include information about the date, time, location, specifics of sales, rate, highest bidder, bid amount and other bidders. At a later time, auditors might confirm these facts.
The borrower will receive details on this procedure once the auction is over. They will receive a registered letter with information on the amount paid in this auction, any outstanding debts, and any remaining balance.
Any remaining funds from this auction are used to pay the necessary taxes and the auctioneer’s commission. Following this, the borrower will receive a refund for the remainder of the debt.
Additional gold auction regulations
The gold loan business has to abide by specific rules. For instance, only upon the completion of loan tenure will any ornament that was pledged under specific special schemes, such as plans with shorter pledge terms, be put up for auction. Additionally, all members of the Association of Gold Loan Companies (India) will have to use standard loan contracts that include information about the auction procedure.
Officials from a lending institution must be present at the public auction as per the gold loan auction rules. To hold an auction, there must also be a sizable number of bids. Borrowers will be able to comprehend the requirements and rules of a gold auction better after reading this guide. An auction provides a clear method of dealing with NPAs while keeping the interests of client in mind. Both lenders and borrowers can benefit greatly from the provision to refund the balance amount, ability for consumers to participate in auctions, and the option to repay the due for asset release prior to the auction date.