They say that it is difficult to get the jewelery back in the event of the death of the gold loan borrower.
Amid the uncertainty arising due to the COVID-19 pandemic, consumer activists have called for the introduction of a loan against gold scheme offered by banks and non-banking financial companies.
“The easiest way for people to raise funds to tide over the hardship caused by the pandemic was to get a loan by pledging their gold. When the gold loan borrower dies, there is a problem in settling the dues and getting back the pledged jewellery,” consumer activist T. Sadagopan said. He said that the Reserve Bank of India should direct the gold loan providers to provide nomination facility at the time of availing the loan.
Tamil Nadu is a major market for gold loans and the market size is estimated to be ₹6 lakh crore.
In many cases, the legal heirs of the borrower may not be aware of the existence and details of such gold loan until the customer’s family, CM Jayaraman, chairman of consumer rights, receives a notice from the bank or financial institution. The organization Citizens Voice Coimbatore, said.
Due to this the account was declared as NPA. He said that settlement and withdrawal of pledged gold was taking more time and it was becoming a cumbersome process. Shri Jayaraman pointed out that in case of death of the borrower, there were several processes involved like death certificate, legal succession certificate.
Even though a close relative of the borrower was ready to repay the entire loan, the settlement took a long time as it had to be approved by the appropriate authority after production of necessary documents, he said.
In most of the cases people were not aware of the procedure to get the jewelery back and had to wander from one to the other to get the required documents.
He said that such situation could be avoided by providing nomination facility which was a common practice in the case of opening of bank accounts, fixed deposits, housing loans etc. and would remove the existing difficulties.
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