No major lapses found in gold loan portfolios of PSBs after audit: FM
Delhi, Mar 26, 2025
Sitharaman was replying to the discussion on the Banking Laws (Amendment) Bill, 2024. Later, the Rajya Sabha passed the Bill by voice vote
Union Finance Minister Nirmala Sitharaman on Wednesday said that public sector banks were asked to conduct a comprehensive audit of gold loan portfolios to ensure full regulatory compliance; however, no major lapses have been reported.
Sitharaman was replying to the discussion on the Banking Laws (Amendment) Bill, 2024. Later, the Rajya Sabha passed the Bill by voice vote. The Lok Sabha (LS) had already passed the Bill in December last year. The Bill proposes 19 amendments to banking laws, including the Reserve Bank of India Act, the Banking Regulation Act, and the Banking Companies (Acquisition and Transfer of Undertakings) Act.
The gold loan portfolio of banks rose by 71.3 per cent year-on-year until December of the current financial year (2024-25) to ₹1.72 trillion, compared to 17 per cent growth a year ago, driven by rising gold prices and a slowdown in unsecured loans following an increase in risk weights last year.
Last year, the Reserve Bank of India (RBI) had advised supervised entities to comprehensively review their policies, processes, and practices on gold loans to identify gaps and initiate appropriate remedial measures in a time-bound manner.
“It is important to note that the non-performing asset (NPA) ratio in gold loans remains low at 0.22 per cent for banks and 2.58 per cent for non-banking financial companies (NBFCs) compared to overall NPA levels.”
According to RBI data, gross NPAs in gold loans of scheduled commercial banks and major NBFCs rose by around 18 per cent between March and June 2024.
“Both the RBI and the government have taken timely and targeted steps to address the issue. Banks and NBFCs have been directed to strengthen appraisal practices, ensure proper gold valuation, comply with loan-to-value norms, and take action in case of non-repayment, including gold auctions with due notice,” Sitharaman said in her reply.
Addressing the question of the reduction in priority sector lending (PSL), the finance minister said: “The shortfall fund is a clear indication that banks operated more robustly and can provide more lending to the sectors under PSL. Banks are achieving the 40 per cent PSL target, which is deemed crucial for the socio-economic development and inclusive growth of the country.”
On Monday, the RBI issued revised guidelines on PSL to facilitate better targeting of bank credit to priority sectors of the economy. The new guidelines will come into effect from April 1, 2025.
On the issue of loan write-offs by PSBs, Sitharaman explained that they are not waivers. “We have explained multiple times in this House what is ‘written off’ as opposed to ‘waived’... ‘Written off’ is not a giveaway; we are following up on these cases. Borrowers of written-off loans remain liable to repay their dues. Banks continue to pursue recovery actions in written-off accounts using various mechanisms,” she added.
Indian banks wrote off loans worth ₹1.7 trillion in 2023-24 (FY24), compared to ₹2.08 trillion in 2022-23, according to data shared by Pankaj Chaudhary, Union Minister of State for Finance, in response to a question in the LS. However, loan write-offs by banks in FY24 were the lowest in the last five years. In 2019-20, banks had written off loans worth ₹2.34 trillion; in 2020-21, they wrote off ₹2.03 trillion; and in 2021-22, the figure was ₹1.75 trillion, the data showed.
[The Business Standard]
