Gold loans are one of the fastest-growing retail credit segments in India. While they offer quick liquidity, they also involve strict regulations around auctioning pledged gold, returning surplus proceeds to borrowers, and timely release of pledged ornaments after repayment. Understanding these rules helps borrowers protect their rights and lenders maintain compliance.
Rules on Auction of Pledged Gold
Notice Period: Before auctioning, lenders must give borrowers a written notice (often 14–30 days) specifying the amount due and the date and venue of the auction.
Transparent Valuation: The gold must be weighed, valued, and auctioned through a transparent process, typically via public auction or a registered auctioneer.
Fair Price: Lenders must try to secure a price as close to market value as possible to protect the borrower’s equity in the pledged gold.
Surplus Return to Borrowers
After auction, the loan outstanding and charges are first deducted from the sale proceeds.
Any surplus (i.e. the amount over and above the outstanding dues) must be returned to the borrower within a prescribed timeframe.
This is mandated under the Fair Practices Code issued by the RBI for NBFCs and banks.
Timely Release of Pledged Gold
On full repayment of the loan and charges, lenders must release the pledged gold within a defined timeline, generally within 24–72 hours of payment, unless there is a dispute.
Borrowers should receive the same ornaments in the same condition as pledged, except for normal wear from storage/handling.
Lenders must maintain records and security measures to ensure safety of pledged items until release.
Borrower Rights Checklist:
Receive written notice before any auction.
Get a detailed statement of loan dues and auction proceeds.
Claim surplus funds promptly after auction.
Obtain timely release of gold after full repayment.
Conclusion:
Gold loan rules around auctions, surplus returns, and timely release of pledged gold are designed to protect borrowers while maintaining transparency in the lending process. By knowing these rights, borrowers can ensure fair treatment and lenders can avoid compliance risks.
Frequently Asked Questions (FAQ)
1. When can a lender auction my pledged gold?
Only after you default on the loan and after giving you a written notice with the auction details.
2. How is the auction price determined?
Through a transparent public auction based on current market prices. Lenders must try to achieve the best price to protect your equity.
3. Will I get the surplus from the auction?
Yes. After deducting the loan amount and charges, any surplus proceeds must be returned to you within the stipulated timeframe.
4. How soon must lenders release my pledged gold after repayment?
Generally within 24–72 hours of full repayment, unless there’s a dispute or regulatory hold.
5. What happens if the auction proceeds are less than my outstanding dues?
You may still owe the shortfall to the lender. It’s important to repay before default to avoid both loss of gold and additional liability.
Published on : 15th September
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed
https://play.google.com/store/apps/details?id=com.vizzve_micro_seva&pcampaignid=web_share