The Center on March 18 directed public sector banks (PSBs) to submit their business plans for the period 2026-2027 (FY27) by March-end. The Economic Times reported. The proposed plans will then be reviewed on a quarterly basis by government-nominated directors of the banks’ boards, the report said, citing an official.
The business plans will be required to include strategies related to increasing low-cost deposits, raising capital, resolving bad loans, improving cybersecurity and financial reach, the report said.
Earlier this month, the Finance Ministry had directed PSBs to conduct a thorough review of their gold loan portfolios. Instances of non-compliance with legal standards resulted in action.
The Department of Financial Services (DFS) has urged banks to conduct a thorough review of the past two years, from January 1, 2022 to January 31, 2024, to ensure that all gold loans were disbursed in accordance with statutory requirements and internal banking policies.
The government’s directive asked the PSBs to rectify anomalies regarding collateral-free gold loan disbursement, fees and interest collection, as well as closure of gold loan accounts and cash repayments.
The country’s largest lender, State Bank of India (SBI), has a gold loan portfolio of Rs 30,881 crore as of December 2023, while the gold loan exposure of another major PSB, Punjab National Bank, stood at Rs 5,315 crore. Bank of Baroda stood at Rs 3,682 crore at the end of the third quarter for FY24.
As per RBI norms, banks or gold loans can provide only 75 percent of the value of the jewellery. However, during the COVID-19 period, relaxation was provided to ease the hardships.
The RBI had increased the permissible Loan to Value (LTV) for loans sanctioned by banks against collateral of gold jewelery and non-agricultural jewelery to 90 per cent in August 2020 from the earlier 75 per cent. This relaxation applied until March 31, 2021.
First print: March 18, 2024 | 11:34 am IST