rbi: Banks ask RBI to frame policy for silver loans

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Banks have reached out to the banking sector regulator, seeking a policy framework for silver metal loans on the lines of existing gold metal loans, or GML, for borrowers which are mostly exporters or domestic manufacturers. This comes after silver exports including silver jewellery jumped by around 16% in the last one year.

A bank executive aware of the matter said with the increase in silver exports, jewellery manufacturers have been asking banks to extend credit for the procurement of silver, silver articles and jewellery manufacturing.

“It was decided to raise this issue with the Reserve Bank of India (RBI) in a meeting last month,” he said, adding that silver exports have touched around ₹25,000 crore and there is a huge demand for credit from this sector.

Under existing regulations, nominated banks are authorised to import gold, and designated banks participating in the Gold Monetisation Scheme, 2015 (GMS) can extend gold (metal) loans (GML) to jewellery exporters or domestic manufacturers of gold jewellery. While the loans are to be repaid in rupees, equivalent to the value of the gold borrowed, banks can provide the borrower with the option to repay a part of the GML in physical gold in lots of one kg or more, subject to certain conditions.

Another bank executive noted that silver jewellery manufacturing has similar price and operational risks as gold jewellery during the manufacturing or operation cycle.

“There is annual growth of around 14-15% in this segment, and it’s best if we have a similar framework as that for GML,” he said, adding that guidelines by the RBI will ensure that there are no violations of existing regulations.

According to the latest data from India’s Gem Jewellery Export Promotion Council (GJEPC), exports of silver jewellery grew 16.02% during FY23 to ₹23,492.71 crore, compared to ₹20,248.09 crore in the previous year.

The central bank had earlier warned lenders that a lack of proper monitoring mechanisms and not ensuring the end use of GML had resulted in certain instances of fraud or misuse related to GML by certain unscrupulous jewellers. It had then directed banks to assess the credit requirements of GML customers, taking into account the track record and credit worthiness of borrowers, the trade cycle of manufacturing activities, and the collateral securities on offer.



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