7. What are the prescribed standards for gold loan documentation?
The loan agreement executed with borrowers, must be standardised across all branches of the lender, and should detail all key terms, including, the description and value of the collateral taken, the auction procedure (in the event of a default), the notice period provided to the borrower for repayment/ settlement of loan prior to the auction, timelines for release of the collateral upon full repayment/ settlement.
Additionally, lenders, while accepting the collateral, must issue a certificate/ e-certificate to be signed by both the lender and borrower, regarding details of the collateral, including, the purity (in carats), the weight of the gold collateral, an image of the collateral; and the value of collateral arrived at the time of sanction.
Given the nature of the sector, all communication with the borrower, must be in the language of the region or in a language as chosen by the borrower. And for illiterate borrowers, lenders must explain important terms and conditions to them in the presence of a witness.
