India's Central Bank Eases Restrictions on Gold Auction

SEATTLE (Scrap Monster): The Reserve Bank of India (RBI) released new notification, allowing for relaxation in gold auction rules for non-banking finance companies (NBFCs) in the country.

As per the new notification, the NBFCs will be allowed to carry out auction of gold jewellery pooled from multiple branches within the same district. Earlier, NBFCs were permitted to conduct the auction only in the same town where the branch was located. However, the relaxation will be applicable only if the first auction conducted by the NBFC in the same town fails. Also, NBFCs should ensure that it meets all requirements of the extant directions regarding an auction.

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The NBFCs are required to declare a reserve price for the pledged ornaments. This price should not be less than 85% of the previous 30-day average closing price as declared by the Bombay Bullion Association or the historic spot gold price circulated by FMC-regulated commodity exchange. Furthermore, it is mandatory for NBFCs to provide full details of the value fetched in the auction.

A recent report by KPMG had predicted five-year CAGR growth of 13.4% to India’s gold loan market.