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Government Banks asked to submit three year business plans by March end


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The Centre, as reported by The Economic Times, has issued a directive to Public-Sector Banks (PSBs) to submit their business plans until the fiscal year 2026-2027 (FY27) by the end of March. These plans will then be evaluated on a quarterly basis by government-appointed directors on the banks’ boards. The objective is to assess strategies for increasing low-cost deposits, raising capital, resolving bad loans, improving cybersecurity, and enhancing financial outreach.

In recent weeks, the finance ministry had instructed PSBs to conduct a comprehensive review of their gold loan portfolios due to instances of non-compliance with regulatory norms. The Department of Financial Services (DFS) has urged banks to thoroughly assess the period from January 1, 2022, to January 31, 2024, to ensure that all gold loans were disbursed in accordance with regulatory requirements and internal bank policies.

The government’s directive also includes rectifying anomalies related to gold loan disbursement without collateral, as well as fee and interest collection. Additionally, the closure of gold loan accounts and cash repayments must be addressed. Notably, the State Bank of India (SBI), the country’s largest lender, has a gold loan portfolio of Rs 30,881 crore as of December 2023. Punjab National Bank and Bank of Baroda also have significant exposure to gold loans, with Rs 5,315 crore and Rs 3,682 crore respectively at the end of the third quarter for FY24.

Under RBI norms, banks and gold loan finance firms are typically allowed to provide only 75 percent of the value of the jewelry as a loan. However, during the COVID-19 period, relaxation was provided to alleviate hardships. In August 2020, the RBI increased the permissible Loan to Value (LTV) to 90 percent for loans sanctioned by banks against pledges of gold ornaments and jewelry for non-agricultural purposes. This relaxation was available until March 31, 2021.

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