DBOD.No. IBS.1519/23.67.001/98-99
December 31, 1998
Paush 1920 (Saka)
To
All the nominated banks authorised
to import Gold/Silver/Platinum
Dear Sir,
gold loan
Please refer to circular A.D. (G.P.
Series) Circular No. 7 dated March 6, 1998 permitting the nominated agencies/banks
to import gold on loan basis for a maximum period of 180 days. With a view to
mobilising and recycling the gold stocks available in the country, the banks
were also recently advised to formulated the Gold Deposit Scheme which entailed
acceptance of physical deposits of gold.
2. We have been receiving requests
form banks to permit them to extend gold loans to jewellery industry. It has
been decided to permit nomiated agencies to grant gold (metal) loans as per
Export Import Policy 1997-2002 and the Hand Book of Procedures of the Exim Policy
subject to the following conditions :
(i) The banks should ensure strict
compliance with the terms and conditions contained in Chapter 8 of both the
Export Import Policy - and Hand Book of Procedures. The policy requires that
the exporter who has obtained the gold, has to complete the exports within a
maximum period of 120 days from the date of release of gold on loan basis. The
priod of such loan shall therefore not exceed 120 days. The nominated banks
will have to obtain necessary proff of exports from the exporter as stipulated
in the policy and furnish them to the Revenue authorities. In the event of default
on the part of the exporter to complete the exports within the stipulated period,
the nominated agencies will have to bear the duty amount and the relative local
taxes. Therefore, nominated banks may obtain sufficient additional security
so as to meet the duty/tax requirements in the event of default. The guidelines
issued by the Revenue authorities including those regarding bonded vault, maintenance
of records, obtaining one time registration certificate of the exporters, reporting
cases of failure on the part of exporter and deposit of the duty amount in case
of default should be meticulously observed.
(ii) The loans should be given only
to jewellery exporters. Interest charged to the borrowers should be linked to
the international gold interest rate.
(iii) The gold borrowing s in terms
fo ECD circular dated March 6, 1998 referred to above and gold deposits will
be subject to normal reserve requirements. Valuation of the gold for the purpose
of maintaining reserves will be based on the London morining fix rate on reporting
Friday crossed with closing dollar rupee spot rate on the reporting Friday.
The same rate may be applied for translating gold loans to rupees for capital
adequacy and balance sheet purposes.
(iv) The loan to the jewellary exporters
in India will be subject to capital adequacy and other prudential requirements.
(v) Any mismatch arising out of
the gold borrowings and lendings should be wihtin the prudential risk limits
approved by the bank's Board.
3. The gold borrowed from abroad/mobilised
in the domestic market and lent to jewellery exporters may be reported in the
statement being submitted to DBOD by the nominated banks.
4. The banks should recognise the
overall risks in granting gold loans and lay down an appropriate risk management
and lending policy. The policy should among others lay down a limit on the quantity
of gold that may be supplied per exporter as also the total quantity of such
loans that may be outstanding at any point of time.
Yours faithfully,
(Devaki Mathukrishnan)
General Manager