Gold Loan Auction Process
In India, there are many lenders who offer gold loans. A gold loan is a form of credit where you can pledge your gold ornaments, coins, bars, etc. and avail a loan in exchange. The interest rates charged for gold loans are lower than that of personal loans as they are secured short-term loans.
However, if you do not pay off your debts on time after availing a gold loan, you might have to lose your gold permanently. Here is a list of factors that you should keep in mind.
What happens when you default on gold loan instalments
When you fail to repay your gold loan, be prepared for the following:
1) The lender will send you repeated reminders
The lender of your gold loan will get in touch with you as the due date for a payment starts to approach. The communication for the same will be sent through emails, text messages, and even letters on a later stage. These will act as reminders for the non-payment of the instalments. The reminders will be to keep the borrower in the loop about the possible consequences that he or she might have to face in case of default.
2) The lender will charge a penal interest
The lender will also charge an additional interest over the usual applicable interest rate. This extra charge will be applicable for the months on which the payments have not been made. This extra interest, also known as the penal interest, is usually charged at the rate of 1% p.a. to 7% p.a. and is subject to differ from lender to lender.
3) Effects on the credit score
In case of default, the credit score of the borrower will take a hefty hit. The credit history of the borrower will also have a recorded default which will make it harder for the borrower to avail credit in the future. A low credit score will also mean that the borrower will not be eligible for a number of credit products offered by various lenders.
4) The lender will auction the gold
In case of a default, the lender will hold the rights to auction the gold against which the loan was availed. The gold acts as a collateral in these cases and thus, the lender will be able to sell the same to cover up for the losses caused due to the non-payment of the gold loan. In such cases, the lender will also get in touch with the borrower at least 2 weeks in advance and inform them about the upcoming auction.
5) The lender might take legal action
The lender will also be able to take legal actions against the defaulter in case the amount received through the gold auction is not sufficient to close the loan. If there is a shortfall, the lender can take legal actions against the borrower to cover up for the same.
One should keep in mind, that there are no fixed rules which are applicable in case of gold loan defaults. The consequences may differ from borrower to borrower.
The Reserve Bank of India vide circular DNBS.CC. PD. No.266 / 03.10.01 / 2011-12 dated 26 March 2012 titled “Guidelines on Fair Practices Code for NBFCs” has advised NBFCs to put in place an Auction Policy duly approved by the Board of Directors. This Auction Policy will replace, in full, theexisting auction policy and all instructions arising there from.
Gold Loan Auction Procdures
A) Public Auction
The term “Auction” used in the policy shall mean realization of the security through Public Auction only.
B) Organisation Structure for Auction Proceedings
The Company shall have a dedicated Auction Department at the Head Office (Auction Dept) to
initiate, supervise and monitor the auction procedure including adherence to the approved policy.The Department will function under the overall control of ED & Head-Operations.
C) Auction in the Normal Course (after completion of tenure of the loan):
Auction process must be commenced in respect of all accounts on completion of the tenure of the loan on which interest due has not been serviced in FULL or where the account has not been settled. The auction must be completed within 3 months of completion of the tenure of the loans.
Discretionary powers to defer auction in accounts where at least 75% of the interest due has been paid shall be vested with the MD & CEO on the recommendations of the ED & Head-Operations. An auction can be deferred at the request made by the customers on reasonable ground, such proposals for deferment of auction submitted by CRMs/SRMs/RMs shall be recommended by EVP-Head (Operations) and approved by the Executive Director.
D) Selection and Approval of Auction Centres, Safe Custody, Security Arrangements
Auction Centre shall be finalized in line with the regulatory norms/ directions and internal guidelines of the company which shall be in compliance with RBI/statutory norms.
Physical transfer of gold from various branches to the regional auction centres/offices shall be
carried out in line with the regulatory/internal norms/directions which shall be subject to
modification from time to time.
E) Authorisation for Auction of Gold
Once the accounts have been identified and listed for auction by the Auction Department the
proposal, in a structured format, shall be put up to the ED for approval. The Auction Department shall ensure that the list is accurate, complete and in compliance with the approved Auction Policy.
F) Mode and Periodicity for Sending Notices, Intimation to the Borrower
- Letter Type Normal Gold
- cum Auction
A notice in the local language, along with English translation, in an approved
format, shall be sent to all “Actionable” pledges furnishing the date and venue of
auction at least 14 days before the proposed date of auction by registered post AD
requesting the borrower to immediately pay the full dues failing which the security
would be liable to be put on auction, without further notice, for recovery of the
i. If the AD card is not received within a reasonable period, the Auction Dept. shall apply to the post office and obtain a certificate of delivery to the addressee from the post office. Alternatively, if theAD card is not available the auction notice may be served on the borrower personally by an employee of the Company and signature of the borrower obtained in the duplicate copy of the notice.
ii. MD & CEO shall be empowered to approve modifications to the above guidelines for Auction
from time to time on the recommendations of the ED & Head-Operations keeping in view, interalia, the regulatory directives, legal position and the Fair Practice Code adopted by the Company.
G) Public Notification/Advertisement
Public notification of auction/advertisement/display of information and other related procedures shall be in line with the applicable rules, regulations and RBI guidelines issued from time to time.
H) Convenient Auction Lots, Fixation of Reserve Price, Security, Insurance
Pledges taken up for Auction must be segregated into appropriate / convenient lots to facilitate
disposal based on various parameters such as assessed purity, quantity of gold, expected
participation of bidders, prevailing market prices etc.
The proposal with recommendations for fixation of the reserve / floor price for each auction shall be done by the Head of the Auction Dept taking into consideration the regulatory directions in place, recommended by the ED & Head-Operations and approved by the MD & CEO. In order that the auction attracts bidders and is successfully completed the reserve price may be fixed at about 5 %below the prevailing market price.
I) Due diligence on Participants, Earnest Money Deposit (EMD)
Proper and acceptable documents for identification of the participants in an auction should be
obtained before permitting them into the auction hall. The usual documents taken for customer
account KYC compliance is to be accepted.
A reasonable amount of EMD should be insisted upon from every participant on such date as maybe
decided by the management from time to time.
J) Mode of Payment by Successful Bidders & Delivery of Gold to Successful Bidders
The mode (cash or banking channels) of receipt of bid amount shall be decided by the management from time to time taking into consideration the market conditions and AML risks involved.
A minimum percentage of the bid amount as decided by the management from time to time
including the EMD lying with the Auctioneer shall be insisted upon from the successful bidders on the date of the auction itself. Successful bidders should be given a letter in a pre-approved format along with the terms and conditions. The balance shall be payable within 5 working days from the date of auction.
If the full amount is not received within the stipulated time, the bid shall be treated ascancelled and a penalty of 5% of bid amount or loss incurred by the company due to rate fluctuation whichever is higher shall be levied and intimated.
Delivery of gold to successful bidders should be made only after confirmation of full receipt of
payment or realization of cheque / draft along with taxes due. Proper acknowledgement by the
bidder for receipt of gold, in a format duly approved, with the signature duly verified by an officer of the Company should be ensured. Loans to bidders against such auctioned gold shall be not permitted.
K) Auction under Exceptional Circumstances
1) Auction Due to Depletion in Security Value (auction before completion of tenure of the loan):
Auction department shall regularly monitor the realizable value of gold and in any instance where the realizable value of gold is less than the actual value, such accounts shall be taken up for auction even before the completion of the tenure of the loan and in accordance with the directions laid down by the management from time to time.MD & CEO shall be empowered to approve modifications to the points mentioned in points C
Auction in normal course and point K 1- Auction due to depletion in value of security, from time to time on the recommendations of the ED & Head-Operations keeping in view, interalia, the regulatory directives, legal position and the Fair Practice Code adopted by the Company. Such modifications shall be reported to the Board in the next meeting for information.
2) Auction of Gold Ornaments Identified as Spurious / Low Quality
a) Accounts in which pledge of spurious / low quality gold ornaments have been detected
subsequent to disbursement may be taken up for auction even before the completion of the tenure of the loan, from date of pledge subject to the under mentioned compliances. The said procedures shall also be followed for spurious/low quality accounts/pledges, identified at the auction centre or after completion of the tenure of the loan2
b) Proper notice/intimation shall be served upon the borrower as mentioned in point K (3).
c) Before serving the above notice the purity of the gold ornaments shall be re-verified internally through a competent officer / auditor. When the amount of initial estimated loss is Rs 1.00 lakh (Rupees one lakh) or above the services of an external expert appraiser shall be obtained before serving the above notice. Melt test (assaying) of a small portion of the pledged gold may be resorted to for re-confirming the purity or in the “difficult- to- assess” cases.
d) The ED shall be empowered to grant extended time for repayment to the borrower on a case to case basis on the recommendations of the Head of the Operations Dept, Head Office.
e) The reserve price for such spurious / low quality ornaments must be fixed keeping in view the reconfirmed assessed purity and the RBI directions issued from time to time. Expert internal / external opinion should be obtained to arrive at a realistic reserve price.
f) Auction of normal/spurious or low quality gold ornaments shall not be taken up when police or criminal case has been filed against the borrower or when there is any other legal impediment. Suitable internal guidelines regarding filing of police cases should be formulated and approved by the MD & CEO on the recommendations of the ED & Head-Operations.
SBI Gold Loan Auction Notice Format:
Our Bank puts up the mortgage properties (like Residential properties / Commercial properties etc.) of defaulters to recover the Bank dues. For this purpose respective Branches of SBI publishes the Advertisement in the leading newspapers (English and Vernacular). The Advertisements are also published in Social Media (like Twitter, Facebook, Instagram etc.).
This advertisement contains the details of web sites where the prospective bidders can access the particulars of locations of the properties with full details. It also guides the prospective bidders on the pre-requirements for participating in e-auction.
We at SBI are very transparent when putting immovable properties, mortgaged with the Bank / attached by Court order to auction, by furnishing all the relevant details that can make it an attractive proposition for bidders to participate in the auctions. We also incorporate all relevant details and state whether the same is freehold or leasehold, give its measurement, location etc., including other relevant details in the public notices issued for auctioning.
The details of such properties put up for e-auctions may be accessed through the links provided in the advertisement. There is designated contact person also for auction at the Branches whom prospective Buyers may approach to for any clarification regarding the auction process and the property he /she is interested in and may inspect the properties of their interest.
Requirements for participating in e-Auction
- EMD for the particular property as mentioned in the e-Auction notice.
- KYC Documents – to be submitted to the concerned Branch.
- Valid Digital Signature -Bidders may approach e-auctioneers or any other authorised agency to obtain digital signature.
- Login Id and Password– Will be sent to the email id of the bidders by e-auctioneers after the deposit of EMD and submission of KYC documents to the concerned branch
- Bidders to login and bid during the auction hours on the date of e-Auction as per auction rules.
For more information on properties and bidding , please visit our Partners :
- C1 INDIA Pvt. Ltd. : https://www.bankeauctions.com/Sbi
- e-Procurement Technologies Limited : https://sbi.auctiontiger.net/EPROC/
- For displaying of the properties : https://ibapi.in
- For auction platform : https://www.mstcecommerce.com/auctionhome/ibapi/index.jsp