While prohibiting NBFCs from issuing misleading, the central bank asked them to value gold jewellery accepted as collateral at the average of closing price of 22-carat gold in past 30 days
Seeking to keep the demand for gold under check, the Reserve Bank of India (RBI) has tightened the norms for loans against gold jewellery.
In a notification, the RBI said, “In order to standardise the valuation and make it more transparent to the borrower, it has been decided that gold jewellery accepted as collateral will have to be valued at the average of the closing price of 22 carat gold for the preceding 30 days as quoted by the Bombay Bullion Association (BBA)."
Currently, there is no standard method for arriving at the value of gold accepted as collateral and the valuation is arbitrary and opaque.
While accepting the gold as collateral, RBI said non-banking financial companies (NBFCs) should give in writing to the borrower, on their letterhead giving the purity (in terms of carats) and weight of gold.
If the gold is of purity less than 22 carat, the NBFC should translate the collateral into 22 carat and state the exact grams of the collateral. In other words, jewellery of lower purity of gold shall be valued proportionately.
The loan to value ratio for loans against jewellery will be 60%.
The notification further said NBFCs financing against the collateral of gold must insist on a copy of the PAN card of the borrower for all transactions above Rs5 lakh. High value loans of Rs1 lakh and above must only be disbursed by cheque. It also directed gold loan companies to standardised documentation across all branches.
"It has been decided that where the gold jewellery pledged by a borrower at any one time or cumulatively on loan outstanding is more than 20 grams, NBFCs must keep record of the verification of the ownership of the jewellery. The method of establishing ownership should be laid down as a Board approved policy,” the notification said.
The central bank has also prohibited NBFCs from issuing misleading advertisements like claiming the availability of loans in a matter of two-three minutes.
Noting that unbridled growth may not be in the overall interests, RBI has also tightened the rules for opening branches by such NBFCs.
“NBFCs, which already have more than 1,000 branches, may approach RBI for prior approval for any further branch expansion,” it said.
Besides, it said that no new branches will be allowed to be opened without the facilities for storage of gold jewellery and minimum security facilities for the pledged gold jewellery.
With regard to auction, the notification said that it should be conducted in the same town or taluka in which the branch that has extended the loan is located.
While auctioning the gold, the NBFC should declare a reserve price for the pledged ornaments, it said, adding that this should not be less than 85% the previous 30-day average closing price of 22 carat gold as declared by BBA.
With the seven new blocks, Coal India hopes to develop 15 open cast and 12 underground mines, with an annual production capacity, when in full operation, of around 40-50 million tonnes
Narasing Rao, chairman and managing director (CMD) of Coal India, while attending a seminar organized by the Mining, Geological and Metallurgical Institute of India, in Kolkata, last week, met the press and told them that plans are afoot to invite bids to appoint miners for seven new coal blocks.
The RFQ (request for qualification) is likely to be floated next week to short list miners to facilitate development of five open cast and two underground mines.
Eventually, Coal India hopes to develop 15 open cast and 12 underground mines, whose total production capacity, when in full operation, is estimated to be in the 40-50 million tonnes annually. Time frame has not been stated as a lot of work will still have to be completed.
It is gratifying to note that the entire process will be completed and contracts awarded, for these seven blocks, by March 2014. These seven blocks are estimated to achieve an annual production of 17-18 million tonnes. The actual development and production wholly depends upon the successful bidder and the speed at which he is able to obtain all necessary "clearances" to commence work at site.
It is expected that some foreign miners will also make bids this time, as this will enable them to offer advanced and technically superior mining equipments, some of which may not have been introduced to this market at all. Presumably, such equipments are already in use, successfully, at other mining areas in Australia and Europe/US. Some bids may be expected from UK and Poland also.
Since this will be a public-private partnership, some of overseas miners may be making the entry bids through their Indian associates, who may be fully conversant with the local conditions. At the end of the day, even though some advanced, state of the art equipments may be offered for use, in these new blocks, the fact remains that manpower requirements will have to be sourced locally.
What is of prime concern and importance is to go through the RFQ in an above-board and fair manner, award the contracts and lay down strict performance deadlines. Environmental issues are most likely stumbling blocks but in order to expedite the development, and reduce the dependence upon imported coal if the authorities were to tweak the rules, in a transparent manner, it may ease the situation.
Other factors, such as the nearest coal block in operation, details of existing railroads for logistical purposes, whether or not government owns the entire land covering the coal blocks, or part of which are privately owned, and the grades of coal that have been found on test drilling carried out, are important in expeditiously finalising the deals.
If Coal India can give further details on these blocks, it would be appreciated.
In the meantime, it would be of interest to know as if Coal India has any plans to rescue 3.5 million tonnes of coal lying in various ports, awaiting clearances, but the importers are reluctant to do so due to high rupee element cost, caused by the fall in value?
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)