Coming soon: A shield for your pledged gold
gold loans can repay the debt and reclaim family jewellery in the event of the borrower's death. A key element of the plan involves asking borrowers to provide a letter authorising who can do so in the event of their death, said people with knowledge of the matter.
Current practices vary in such situations and often give rise to various legal challenges, which meant the lender would auction off the pledged gold, they said.
Legal Issues
Putting rules in place would allow families to legally assume loan service obligations to secure the underlying gold, given the sentimental value typically attached to ornaments belonging to close relatives.
«Earlier this month, in a meeting, this issue was discussed, and there was a consensus that authorisation letters can be sought from borrowers,» said one of the executives. «Banks will also explore a standardised format to avoid legal hassles.»
Some state-run banks have already started to offer this option but there are operational issues due to lack of a legal framework.
The loan against gold segment is one of the fastest-growing categories for lenders. As of January 26, 2024, outstanding loans against gold jewellery were up 17.4% from a year earlier to Rs 1.02 lakh crore.
Last year, a committee headed by former Reserve Bank of India (RBI) deputy governor BP Kanungo suggested that in case a borrower dies, a notice should be sent to the nominee or legal heir to check if they want to settle the outstanding amount. Their response should be on record in case the pledged gold
