RBI allows NBFCs to auction gold attached for debt on any part of the district for second auction.

RBI vide Notification Dated 21 January 2020 has altered the Master Direction – Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company and Master Direction – Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016. The Notification allows NBFCs to auction the gold attached for debt on any part of the district for second auction.

Paragraph 27 of both the master directions provides that the auction shall be conducted in the same town or taluka in which the branch that has extended the loan is located. RBI has altered the provisions to relax the territorial restriction for second auction.

RBI clarified that from now on NBFCs can pool gold jewelry from different branches in a district and auction it at any location within the district, subject to meeting the following conditions:

1. The first auction has failed.
2. The NBFC shall ensure that all other requirements of the extant directions regarding auction (prior notice, reserve price, arms-length relationship, disclosures, etc.) are met.
3. Non-adherence to the above conditions will attract strict enforcement action.

Click here to read the Notification.