The finance ministry has directed all state-owned banks to review their gold loan portfolio as instances of non-compliance with regulatory norms have been noticed by the government.

The Department of Financial Services (DFS) in a communication addressed to heads of public sector banks has asked them to look at their system and processes related to gold loans.

“We have asked banks to undertake comprehensive review of the gold loan business,” financial services secretary Vivek Joshi told PTI.

A directive in this regard was issued last month advising them to fix anomalies relating to collection of fees and interest and closure of gold loan accounts.

The letter flagged various concerns, including disbursement of gold loans without requisite gold collateral, anomalies regarding collection of fees and repayment in cash.

The DFS urged banks to undertake a thorough review of the last two-year period from January 1, 2022 to January 31, 2024 so as to ensure that all gold loans were disbursed in compliance with regulatory requirements and internal policies of banks.

It is to be noted that the price of the yellow metal has surged to a record level. Price of 10 gm gold in the last one month has jumped from Rs 63,365 to Rs 67,605.

According to the letter, the department has come across instances of non-compliance regarding the gold loan portfolio and hence issued the advisory.

The country’s biggest lender, State Bank of India (SBI) alone has a gold loan portfolio of Rs 30,881 crore as of December 2023.