Lending against Gold Collateral
Lending against Gold Collateral
Lending against Gold Collateral
Methodology for determination of Net Weight of Gold collateral
- Deduct the weight of non-gold components (e.g., threads, wax, stones, or other embedded materials) from the gross weight to arrive at the pure gold content.
- Apply an additional deduction of 5% of the gross weight to account for impurities, dust, or similar factors, based on the nature of the gold
Price used to value the Gold Collateral
Gold collateral is valued using the reference price for its actual purity (caratage), taking the lower of:
- The average closing price of gold of that specific purity over the preceding 30 days, or
- The closing price of gold of that specific purity on the preceding day.
as published by the India Bullion and Jewellers Association Ltd. (IBJA)
If price information for the specific purity is not directly available, the Bank shall use the published price for the nearest available purity and proportionately adjust the weight of the collateral based on its actual purity to arrive at the valuation.
To mitigate the risk associated with gold price volatility, Bank shall periodically review and if necessary, revise the methodology and parameters used for gold collateral valuation.
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