The Centre has directed Public-Sector Banks (PSBs) to submit comprehensive business plans outlining their strategies until the fiscal year 2026-2027 (FY27) by the end of March. As per reports, these proposed plans will undergo quarterly evaluations by government-nominated directors serving on the banks’ boards, as stated by an official source.
The business plans mandated by the directive are expected to encompass strategies aimed at enhancing low-cost deposits, capital augmentation, resolution of non-performing assets (NPAs), bolstering cyber security measures, and expanding financial outreach, the report added.
Earlier this month, the finance ministry had instructed PSBs to conduct a meticulous review of their gold loan portfolios. Instances of non-compliance with regulatory norms were cited as the impetus behind this action.
The Department of Financial Services (DFS) urged banks to undertake a comprehensive review of the period spanning from January 1, 2022, to January 31, 2024, to ensure the adherence of all gold loan disbursals with regulatory stipulations and internal bank policies.
The government’s directive specifically called for rectifying anomalies related to gold loan disbursements without collateral, fee and interest collection, as well as the closure of gold loan accounts and cash repayments.
Providing insights into the current gold loan portfolios of key PSBs, the State Bank of India (SBI) was noted to possess a gold loan portfolio of Rs 30,881 crore as of December 2023. Additionally, Punjab National Bank reported a gold loan exposure of Rs 5,315 crore, while Bank of Baroda’s stood at Rs 3,682 crore at the conclusion of the third quarter of FY24.
In accordance with Reserve Bank of India (RBI) norms, banks or gold loan finance firms are permitted to extend loans up to 75 per cent of the value of the jewellery. However, during the COVID-19 period, relaxation was provided to alleviate hardships.
During August 2020, the RBI increased the permissible Loan to Value (LTV) ratio for loans sanctioned by banks against pledges of gold ornaments and jewellery for non-agricultural purposes to 90 per cent, up from the earlier 75 per cent. This relaxation was available until March 31, 2021, as a measure to support borrowers during the pandemic.
