chapter 01 bullion policy - union bank of...

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CHAPTER 01 BULLION POLICY

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CHAPTER 01

BULLION POLICY INDEX

Para No TOPIC Page No

Annexure – I

Bullion to Domestic Jewellery Manufacturers / Bullion

Dealers - Out-Right Basis

1 Preamble 4

2 1 Eligibility 4

2 2 Supply of Gold 4

2 3 Reporting 4

2 4 General 5

Annexure –II

Union Bullion to Exporters - Out-Right Basis

1 Preamble 1

2 1 Eligibility 1

2 2 Supply of Gold 1

2 3 Reporting 1

2 4 General 2

Annexure –III

Union Bullion - Loan to Exporters

1 Purpose 1

2 Eligibility 1

3 Security 1

5 Limit 1

5 Margin 1

6 Min and Max quantity 2

7 Interest 2

8 Loan Period 3

9 Documentation 3

10 Repayment 3

11 Operation of the scheme 3

12 Suppliers 3

13 Procedure for clearing/ vaulting of gold 4

14 Other operational details 4

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15 Documents to be submitted by the exporter 5

16 Reporting 5

17 Delegation of sanctioning powers 5

18 Other conditions 6

19 Amendment to the policy 6

Annexure - IV

1 Eligibility 1

2 Purpose 1

3 Period 1

4 Amount 1

5 Documentation 1

6 Margin 2

7 Procedure 2

8 Precautions 3

Annexure B


1 Purpose 1

2 Eligibility 1

3 Security 1

4 Limit 1

5 Margin 1

6 Min and Max quantity 2

7 Interest 2

8 Loan Period 3

9 Documentation 3

10 Repayment 3

11 Operation of the scheme 3

12 Suppliers 3

13 Procedure for clearing/ vaulting of gold 3

14 Other operational details 4

15 Documents to be submitted by the exporter 5

16 Reporting 5

17 Delegation of sanctioning powers 7

18 Other conditions 7

19 Amendment to the policy 8

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ANNEXURE-I

Bullion to Domestic Jewellery Manufacturers / Bullion Dealers - Out-Right

Basis 1. Preamble 1.1 The scheme is to be implemented only at designated branches of the

Bank as advised from time to time. Reserve Bank of India vide AP (DIR Series) Circular No 15 dated 22/07/2013 and AP (DIR Series) Circular No 25 dated 14/08/2013 and also from the Central Board of Excise and Customs dated 04/09/2013, has permitted nominated banks to extend Gold only on Out-Right Basis to Domestic Jewellery manufacturers / Bullion Dealers. The salient features of the scheme are given below.

2.1 Eligibility :

(a) The Domestic Jeweller should have an account with us for the past

3 years. The minimum criteria of 3 years can be relaxed with the specific approval of the GM (DFB&IBD) on the specific recommendation of the respective Regional Head and Field General Manager

(b) Usually the customer should have good track record for a minimum

period of three years in gold jewellery industry. This stipulated minimum period can be reduced/waived for new entrants by an authority not below the rank of General Manager Such relaxation to be permitted by GM, DFB&IBD upon specific recommendations from RO / FGMO.

(c) The applicants should have a valid Sales Tax registration and VAT

registration.

2.2 Supply of Gold:

(a) Supply of Gold to Domestic Jewellery Manufacturers / Bullion Dealers would be strictly on Cash basis.

(b) Loan / Credit in any form for purchase of Gold by Domestic Jewellery Manufacturers / Wholesalers is strictly prohibited

2.3 Reporting:

DFB&IBD will place, on a monthly basis, a compliance report on the

exposure as well as the business turnover to Chairman & Managing Director /Executive Director.

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2.4 General:

The notional cost of gold in rupee on a day shall be calculated using the following rates:

(a) London A.M. Fixing for Gold-US$ rate prevailing on the day. In

case it is not a business day in London, the previous London A.M. Fixing rate for Gold-US$ will be taken

(b) Rupee-US dollar reference rate announced by the RBI / FEDAI. (c) Customs duty at prevalent rate for import of gold (d) Octroi, Sales Tax and other taxes (to be calculated on the total

value in rupees including custom duty) (e) CIP (carriage, insurance paid) expenses and commission as

applicable.

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ANNEXURE-II

Union Bullion to Exporters of Jewellery - Out-Right Basis 1. Preamble 1.1 The scheme is to be implemented only at designated branches of the

Bank as advised from time to time. Reserve Bank of India vide AP (DIR Series) Circular No 15 dated 22/07/2013 and AP (DIR Series) Circular No 25 dated 14/08/2013 and also from the Central Board of Excise and Customs dated 04/09/2013, has permitted nominated banks to extend Gold only on Out-Right Basis to Domestic Jewellery manufacturers / Bullion Dealers. The salient features of the scheme are given below.

2.1 Eligibility :

(a) Exporters who have minimum 3 years experience in export of

gold jewellery and who are customers of the Bank.(Any waiver from the prescribed 3 years of experience may be waived by GM, DFB&IBD upon recommendation from Regional Office/FGMO.

(b) Usually the customer should have good track record for a minimum period of three years in gold jewellery industry. This stipulated minimum period can be reduced/waived for new entrants by an authority not below the rank of General Manager Such relaxation to be permitted by GM, DFB&IBD upon recommendations from RO / FGMO.

(c) The applicants should have a valid IEC code. (d) To have necessary Sales Tax Registration and exemption for

payment of Sales Tax for exports. (e) To be a registered exporter with Gem & Jewellery Export

Promotion Council.

2.2 Supply of Gold: a) Supply of Gold to Exporters of Jewellery on Cash basis against full

payment upfront. b) Facility Period for submission of export documents:

Maximum 270 days (pre-shipment 90 days and post-shipment 180 days) or less as agreed by supplier of gold or as per RBI guidelines from time to time.

2.3 Reporting:

a. Monthly statement to be submitted to customs authorities as per the requirements of Bond and the proof of exports.

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b. Branches to report to DFB&IBD the following details:

Outstanding balance at the beginning of the month --

ADD Replenishment --

LESS Sales on outright basis --

On loan basis --

Closing balance

DFB&IBD will place, on a monthly basis, a compliance report on the exposure as well as the business turnover to Chairman & Managing Director /Executive Director.

2.4 General:

The notional cost of gold in rupee on a day shall be calculated using the following rates:

(a) London A.M. Fixing for Gold-US$ rate prevailing on the day. In

case it is not a business day in London, the previous London A.M. Fixing rate for Gold-US$ will be taken

(b) Rupee-US dollar reference rate announced by the RBI / FEDAI. (c) Customs duty at prevalent rate for import of gold (d) Octroi, Sales Tax and other taxes (to be calculated on the total

value in rupees including custom duty) (e) CIP (carriage, insurance paid) expenses and commission as

applicable.

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ANNEXURE - III


1. Purpose:

(a) To meet the Bullion needs of Exporters of Jewellery, on loan basis.

(b) To provide flexibility to fix price and repay loan within 180 days from date of export.

2. Eligibility:

(a) Exporters who have minimum 3 years experience in export of gold jewellery and who are customers of the Bank.(Any waiver from the prescribed 3 years of experience may be waived by GM, DFB&IBD upon recommendation from Regional Office/FGMO.

(b) Exporters, if a loan is sanctioned without backing of L/G, must be a customer having rating of CR4 or better.

(c) To have necessary Sales Tax Registration and exemption for payment of Sales Tax for exports.

(d) To be a registered exporter with Gem & Jewellery Export Promotion Council.

(e) Export order to the extent of loan. 3. Security:

(a) Primary security of gold or receivables arising out of export or (b) Against irrevocable L/G of scheduled commercial bank

acceptable to us. (c) The amount of such Bank Guarantee / Standby LC may be

expressed in Indian Rupees or acceptable foreign currency in case of units in SEZ.

4. Limit:

A separate limit to be sanctioned by competent authority either by (i) Apportioning existing export limits or (ii) Against other bank L/G

5. Margin:

(a) Where the exporter is enjoying credit limits and loan is given by apportioning the limits, margin to the extent of 10% apart from customs duty, before release of gold.

(b) Where the customer do not enjoy regular limit and loan is extended against L/G of another banks, L/G should be at least for 110% of current Gold price at the time of loan, in addition to the customs duty component.

(c) The branch will keep track of margin and when the margin is reduced to 3% or below, the customer will be required to provide additional margin to restore it to 10%. In case of failure to do so, Bank will crystallize the liability and enforce payment.

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6. Minimum and Maximum Quantity :

Minimum quantity – 1 kg

Maximum quantity – requirements of the customer subject to limit in force/cash margin/LCs/Standby LCs as stated hereinabove.

7. Interest:

With rise in cost of servicing, monitoring of gold loans and also to get a decent return, revision in rate of interest is proposed. Rate of interest would be linked to volume and rating of the customer. As credit risk varies in case of Direct loan and loan against SBLC/LG, we propose two interest rate structures as follows:

7.1 Interest on Direct Gold Loan to Exports

Volume (Outstanding) Credit Rating Rate of Interest

Upto 100 Kgs CR1 and CR2 Cost plus 250 bps

CR3 and CR4 Cost plus 300 bps

From 101 to 250 Kgs CR1 and CR2 Cost plus 200 bps




More than 500 Kgs CR1 and CR2 Cost plus 100 bps


7.2 Interest on Gold Loan to Exports against other bank’s SBLC/LG

Volume (Outstanding) Rate of Interest

Upto 100 Kgs Cost plus 200 bps

From 101 to 250 Kgs Cost plus 150 bps


More than 500 Kgs Cost plus 50 bps

7.3 The applicable interest rate for a customer or group may be determined as follows:

i. If the customer is sanctioned fresh limit the rate of interest will taking in view the total gold loan he can avail under the sanctioned limit.

ii. In case of renewal of any interest rate or request for reduction in interest rate the outstanding for calculating future interest rate will be average gold loan outstanding in previous six months.

iii. If the customer is enjoying multiple limit like working capital sanctioned limit, Cash margin including lien on fixed deposits to the extent of 110% of the notional cost of gold lent, or

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under BG/SBLC. The interest rate will be calculated as per the weightage of all the limit taking into consideration assuming that all outstanding are in the individual limit.

7.3 Any finer rate of interest beyond as stipulated in para 7.1 and 7.2 is to be approved by Executive Director.

7.4 Borrowing cost will be calculated by DFB&IBD in each month and the sanctioning authority will determine rate of interest based on such cost while approving Gold Loan.

7.5 For approving concession in rate of interest guidelines are in place for general credit limits. The same delegation is applicable in case of permitting concession in rate of interest in Gold loan to Exporters.

7.6 Existing rate of interest will be applicable to existing Gold Loan accounts till date of review/renewal and thereafter new rate of interest rate as proposed above will be applicable.

8. Loan Period:


9. Documentation:

a. Loan Agreement for hypothecation of Bullion / Jewellery. b. All other usual documents based on type of client and the

facility.

10. Repayment: a) Export has to be completed within 90 days of release of Gold. b) Repayment to be made within 180 days or such lesser period as

agreed, from the date of export. c) Price can be fixed any time during the currency of loan. d) Advance remittance, export proceeds realized/or from EEFC

balances of the exporter. e) Once the price is fixed, the rate to be communicated to the

branchho is dealing with export document to ensure export proceeds are realized.

f) Price fixing can be done in lots of 1 kg. or more within 180 days from the date of export.

11. Operation of the Scheme:

The scheme will be made available at select branches (Designated Branches) only in centers depending upon the requirements.

12. Suppliers:

Gold will be procured from international suppliers / banks as per the limits fixed by them for loans at mutually agreed terms.

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13. Procedure for clearing/vaulting of Gold:

(a) Designated Branch should place an indent with DFB&IBD, C.O. / Treasury branch for importing gold on consignment basis stating quantity, bar size and fineness, taking into account the requirements/orders placed by the client.

(b) Bullion Dealers at Treasury branch will contact the suppliers and place an order matching with the one received from the ordering branch specifying the quantity, fineness and the bar size etc.,

(c) Overseas supplier will send advice of shipment alongwith airway bill (AWB) to the ordering designated branch.

(d) Gold will be received at customs and will be stored / cleared against bond without payment of duty.

(e) The designated clearing agents will arrange for clearance of gold and store the same in the bonded warehouse and will inform ordering branch accordingly.

(f) The branch should verify the quantity, fineness etc. from the invoice submitted by the overseas supplier. If it matches with details of gold stored in the bonded warehouse, necessary entries should be made in the Import Register.

(g) The approval obtained from customs is for storage of a maximum quantity of 500 kgs per location.

(h) If gold remains in bonded warehouse beyond the aforesaid period additional storage / insurance cost will have to be borne by the Bank. Therefore, Branch should ensure disposal of gold held in the bonded warehouse within the stipulated period as stated in consignment agreement/informed by supplier while accepting order. .

(i) A confirmation to having received the gold should be sent by the branch to the overseas supplier.

14. Other Operational Details: (a) Customers will submit their request for release of gold on loan

basis. Branch to obtain Bullion Credit Agreement as per format.

(b) Branch to ensure that the necessary formalities like margin requirements etc. are complied with.

(c) Gold will be delivered to the customer after preparing gold loan challans and after obtaining acknowledgement from the customer for having received the gold.

(d) Customer-wise loan ledger will be maintained and delivery effected will be recorded in this ledger.

(e) At the end of the day the details of delivery effected on gold loan basis will be informed to the suppliers / Treasury branch.

(f) The record in customer wise loan ledgers will be in kg. bars and the daily products will be calculated in quantity of gold. For recovering interest the aggregate of the products so arrived

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during the month will be multiplied by average London AM fixing rate. For this purpose simple average of London AM fixing rate (during the month), for 28/30/31 days as the case may be, will be calculated. The interest will be recovered on monthly basis or at the time of closure of loan when there is no other gold loan outstanding...

(g) The interest to be paid to the overseas supplier will be on a calendar month basis. Besides, the supplier will also charge a premium per ounce to cover their overheads, which will be included in the purchase price.

15. Documents to be submitted by Exporter: After effecting exports, the customer will submit:-

Shipping bill triplicate copy.

Invoice copy certified by customs.

These details to be obtained for each and every challan issued at the time of effecting delivery of goods.

The final invoice will be prepared after price fixing.

The reconciliation of branch records with the suppliers will be carried out on fortnightly basis.

16. Reporting: a. Monthly statement to be submitted to customs authorities as

per the requirements of Bond and the proof of exports. b. Branches to report to DFB&IBD the following details:




On loan basis --

Closing balance -- 17. Delegation of sanctioning powers:

a. The powers as applicable to sanction of working capital facilities as well as against Bank Guarantees / 110% cash margin would be exercised by Regional Office Level Credit Committee(RLCC)/Zonal Office Level Credit Committee (ZLCC)/Credit Approval Committee-I and II at Central Office as per the ‘Scheme of Delegation for Loaning Powers’. Though, the initial sanction of facility will be done at Zonal Office / Field General Manager's Office the subsequent renewal of limits will be done at Regional Office.

b. Approval from GM, DFB&IBD, C.O. to be obtained for

selection of all new customers for loan transactions.

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18. Other Conditions :

a) Gold loan is to be subject to Capital Adequacy, Statutory Reserve requirements and other prudential norms as stipulated by Reserve Bank of India from time to time.

b) Branches should ensure end-use of gold loans to jewellery exporters and adhere to KYC guidelines.

c) The Standby LC / LG should cover at all times the full value of the quantity of gold and the agreed margin. The Standby LC / LG should be issued by Scheduled Commercial Bank to whom Bank has approved Counter Party limits and should be in favour of our Bank. The Designated branch should correctly capture the details of the Bank against whose Standby LC/LG, gold loan advance is granted. Such details are required to be captured in Finacle system to monitor counter party exposure limit. The Branch should also separately report details of Standby LC/LG to DFB&IBD.

d) The exposure assumed by extending Gold Loan against Standby LC/LG of another bank will be deemed as an exposure on the guaranteeing bank and attract appropriate risk weight as per extant guidelines.

e) Branches should calculate exposure and should comply with prudential norms by converting into Rupees the gold quantity lent, as per the gold rate published in daily card-rate sheet.

19. Amendment to the Policy :

The policy can be amended from time to time based on the business requirements and regulatory guidelines. Such amendment, including the increase of exposure limits, eligibility criteria, security, interest rate etc. will be approved by Chairman & Managing Director or in his absence Executive Director.

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ANNEXURE - IV

Union Bullion - Gold Forward 1. Eligibility

A. i) Customers maintaining account with us who are exporters of gold products, jewellery manufacturers, trading house etc. and are eligible to enter into forward contract as per RBI circular dated 26-10-2002.

OR ii) Exporters of gold products, jewellery manufacturers, trading house etc. buying gold from our Bank against submission of Bank Guarantee of other banks.

B. i) The customer should have a good track record for a period of three

years in gold/jewellery industry. AND

ii) Customers who are offered this product should first be approved by DFB&IBD, C.O.

2. Purpose

i) To hedge the risk in respect of sale and purchase transactions ii) To buy for repayment of borrowed gold under gold loan

transactions. 3. Period Not exceeding 6 months or as permitted under EXIM Policy and FEMA. 4. Amount

i) To the extent of the underlying exposure. However, the outstanding gold forward amount not to exceed the working capital limits (like export credit, cash credit etc.), if any, sanctioned to customers, or

ii) To the extent of underlying exposure but not exceeding the amount of Bank Guarantee value in case of customers buying gold from our Bank against Bank Guarantee of other banks, or

iii) To the extent of underlying exposure, as declared, in case of customers not enjoying any credit facilities, with margin as per the scheme and to be sanctioned as per delegated authority as detailed in para 8(iii).

5. Documentation

i) An application requesting booking of gold forward declaring the underlying exposure and indicating the period for booking of forward contract.

ii) Forward contract agreement.

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6. Margin i) 10% cash margin for the amount of forward contract to be booked.

Separate cash margin in the form of deposit marked 'Under Lien' to the Bank is to be obtained. Any reduction in margin is to be referred to DFB&IBD. GM(DFB&IBD) will have power to consider reduction in cash margin

ii) In case forward contract is booked for repayment of Gold (Metal) Loan availed from the Bank, the stipulated margin taken for the said loan may be considered for booking of forward contract. In other words, no separate margin need be insisted upon, PROVIDED, the forward contract maturity amount falls within the loan amount outstanding plus margin already obtained / amount of Bank Guarantee issued by other banks.

iii) Outstanding gold forward contracts to be marked to market on monthly basis as per rates obtained from Treasury branch. Where margin falls below 10% the stipulated margin, Branch to monitor and call for additional margin as per 8 (v).

7. Procedure

i) Customer will submit the request for booking of forward contract to the branch giving following details :

Quantity in troy ounce

Period not exceeding 180 days

Expected rate or a range of rates.

Supplier's name ii) Branch will process the request by preparing a process note

and take approval of the head of the branch. iii) Branch will contact the bullion dealers at Treasury branch and

place the order. iv) Bullion dealers will place matching order with the supplier. v) Price and terms will be communicated to the branch customer. vi) On branch/customer agreeing to the terms, contract will be

booked with the suppliers. vii) Back office at Treasury branch will control the contra liability

and generate forward contract which will be forwarded to the branch.

viii) Branch to obtain confirmation of contract from the customers after affixing the required stamp duty and send one copy of confirmation duly signed to back office of Treasury branch.

ix) Branch to pass a contra liability in their books which will be only for control purpose, taking the gold rate as per card rate-sheet for the day. The same should be reversed on the last date of the financial year and re-controlled on 1st day of new financial year as per procedure advised above.

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x) Due dates for expiry to be diarised and customers must advise at least ten days in advance disposal instruction for the forward contract and amount.

xi) Utilization of the contract will be reported on due date to Treasury branch and the contra liability will be reversed at branch as well as at back office of Treasury branch.

xii) Cancellation of contract be permitted, on receipt of a written request, provided the same is received on or before due date. Profit / loss on cancellation be paid / recovered to / from the customer.

xiii) In case no request for cancellation is received, the contract be cancelled at London AM Fixing rate of Gold and ongoing INR/USD market rate and amount to be recovered from the customer on the due date itself. Margin money will be appropriated first.

xiv) Physical delivery under the forward contract should be permitted only if prior written notice of at least 10 days is given by the customer.

xv) Branches will report the details of contracts booked toDFB& IBD on a monthly basis.

8. Precautions

i) Forward contracts outstanding at any point of time will not exceed 100% of the working capital limits.

ii) In case of sale of gold against submission of Bank Guarantee of other banks, the value of forward contract outstanding should not exceed the Bank Guarantee submitted.

iii) For customers not enjoying credit limits or requiring forward contract more than 100% of working capital limits, the delegated authority for booking of forward contract will be as under:

- Upto USD 500,000 - Head of the Branch (not below the rank of Chief Manager) - Upto USD 2 mio - Dy. Gen. Manager/Regional Head - Upto USD 5 mio - General Manager/GMO - Beyond USD 5 mio - General Manager [DFB&IBD], C.O.

The delegated authority will exercise his powers after satisfying

: 1. KYC norms 2. Satisfactory credit report 3. Customers' dealing in Bullion / Jewellery 4. Satisfaction of eligibility criterion of the product. Client selection under the product irrespective of the amount of Gold Forward to be first approved by Regional Head and then by GM (DFD&IBD) and subsequent renewal will be done as per above delegation.

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iv) In all the cases from (i) to (iii) above, margin as stipulated in point 6 (i) to be obtained and also to be marked to market as per point 6 (iii).

v) Where the margin falls below 5% of the outstanding forward contracts valued at London AM fixing rate on any day, customer will be given notice to increase the margin within one day failing which the transaction will be squared on 5th day without notice to the customer. A suitable undertaking will be taken in the application accordingly. Loss on account of such cancellation to be recovered from customer or appropriated against the existing margin.

vi) Treasury branch will ensure that the exposure for cover contracts should be within the sub-limit of the umbrella limit for booking of inter-bank deals approved for the respective counter party.

vii) Branch to obtain request letter from the customer for booking of the forward contract signed by authorized officials of the customers.

viii) Contract confirmation to be obtained from customers and the same should be signed by authorized officials after affixing the requisite stamp duty (as applicable in the state).

ix) Mid office of Treasury branch to monitor all gold forward transactions including the 'Marked to Market' value of contracts where the increase in price of the market is beyond 5% in a given week. Otherwise monthly monitoring will be done.

x) The exposure will be arrived at by computing the value of gold in USD as per London AM fixing rate with the INR/USD reference rate announced by FEDAI on the last day of the month.

xi) Treasury branch will send 'Marked to Market' value of all contracts customer wise, on monthly basis to all concerned branches under copy to DFB&IBD.

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ANNEXURE - B


1. Purpose:

(a) To meet the Bullion needs of Exporters of Jewellery, on loan basis.

(b) To provide flexibility to fix price and repay loan within 180 days from date of export.

2. Eligibility:

(a) Exporters who have minimum 3 years experience in export of gold jewellery and who are customers of the Bank.(Any waiver from the prescribed 3 years of experience may be waived by GM, DFB&IBD upon recommendation from Regional Office/FGMO.

(b) Exporters, if a loan is sanctioned without backing of L/G, must be a customer having rating of CR4 or better.

(c) To have necessary Sales Tax Registration and exemption for payment of Sales Tax for exports.

(d) To be a registered exporter with Gem & Jewellery Export Promotion Council.

(e) Export order to the extent of loan. 3. Security:

(a) Primary security of gold or receivables arising out of export or (b) Against irrevocable L/G of scheduled commercial bank

acceptable to us. (c) The amount of such Bank Guarantee / Standby LC may be

expressed in Indian Rupees or acceptable foreign currency in case of units in SEZ.

4. Limit:

A separate limit to be sanctioned by competent authority either by (i) Apportioning existing export limits or (ii) Against other bank L/G

5. Margin:

(a) Where the exporter is enjoying credit limits and loan is given by apportioning the limits, margin to the extent of 10% apart from customs duty, before release of gold.

(b) Where the customer do not enjoy regular limit and loan is extended against L/G of another banks, L/G should be at least for 110% of current Gold price at the time of loan, in addition to the customs duty component.

(c) The branch will keep track of margin and when the margin is reduced to 3% or below, the customer will be required to provide additional margin to restore it to 10%. In case of failure to do so, Bank will crystallize the liability and enforce payment.

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6. Minimum and Maximum Quantity :

Minimum quantity – 1 kg

Maximum quantity – requirements of the customer subject to limit in force/cash margin/LCs/Standby LCs as stated hereinabove.

7. Interest:

With rise in cost of servicing, monitoring of gold loans and also to get a decent return, revision in rate of interest is proposed. Rate of interest would be linked to volume and rating of the customer. As credit risk varies in case of Direct loan and loan against SBLC/LG, we propose two interest rate structures as follows:

7.1 Interest on Direct Gold Loan to Exports

Volume (Outstanding) Credit Rating Rate of Interest

Upto 100 Kgs CR1 and CR2 Cost plus 250 bps






More than 500 Kgs CR1 and CR2 Cost plus 100 bps


7.2 Interest on Gold Loan to Exports against other bank’s SBLC/LG

Volume (Outstanding) Rate of Interest

Upto 100 Kgs Cost plus 200 bps



More than 500 Kgs Cost plus 50 bps

7.3 The applicable interest rate for a customer or group may be determined as follows:

i. If the customer is sanctioned fresh limit the rate of interest will taking in view the total gold loan he can avail under the sanctioned limit.

ii. In case of renewal of any interest rate or request for reduction in interest rate the outstanding for calculating future interest rate will be average gold loan outstanding in previous six months.

iii. If the customer is enjoying multiple limit like working capital sanctioned limit, Cash margin including lien on fixed deposits to the extent of 110% of the notional cost of gold lent, or

3

under BG/SBLC. The interest rate will be calculated as per the weightage of all the limit taking into consideration assuming that all outstanding are in the individual limit.

7.3 Any finer rate of interest beyond as stipulated in para 7.1 and 7.2 is to be approved by Executive Director.

7.4 Borrowing cost will be calculated by DFB&IBD in each month and the sanctioning authority will determine rate of interest based on such cost while approving Gold Loan.

7.5 For approving concession in rate of interest guidelines are in place for general credit limits. The same delegation is applicable in case of permitting concession in rate of interest in Gold loan to Exporters.

7.6 Existing rate of interest will be applicable to existing Gold Loan accounts till date of review/renewal and thereafter new rate of interest rate as proposed above will be applicable.

8. Loan Period:


9. Documentation:

a. Loan Agreement for hypothecation of Bullion / Jewellery. b. All other usual documents based on type of client and the

facility.

10. Repayment: a) Export has to be completed within 90 days of release of Gold. b) Repayment to be made within 180 days or such lesser period as

agreed, from the date of export. c) Price can be fixed any time during the currency of loan. d) Advance remittance, export proceeds realized/or from EEFC

balances of the exporter. e) Once the price is fixed, the rate to be communicated to the

branchho is dealing with export document to ensure export proceeds are realized.

f) Price fixing can be done in lots of 1 kg. or more within 180 days from the date of export.

11. Operation of the Scheme:

The scheme will be made available at select branches (Designated Branches) only in centers depending upon the requirements.

12. Suppliers:

Gold will be procured from international suppliers / banks as per the limits fixed by them for loans at mutually agreed terms.

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13. Procedure for clearing/vaulting of Gold:

(a) Designated Branch should place an indent with DFB&IBD, C.O. / Treasury branch for importing gold on consignment basis stating quantity, bar size and fineness, taking into account the requirements/orders placed by the client.

(b) Bullion Dealers at Treasury branch will contact the suppliers and place an order matching with the one received from the ordering branch specifying the quantity, fineness and the bar size etc.,

(c) Overseas supplier will send advice of shipment alongwith airway bill (AWB) to the ordering designated branch.

(d) Gold will be received at customs and will be stored / cleared against bond without payment of duty.

(e) The designated clearing agents will arrange for clearance of gold and store the same in the bonded warehouse and will inform ordering branch accordingly.

(f) The branch should verify the quantity, fineness etc. from the invoice submitted by the overseas supplier. If it matches with details of gold stored in the bonded warehouse, necessary entries should be made in the Import Register.

(g) The approval obtained from customs is for storage of a maximum quantity of 500 kgs per location.

(h) If gold remains in bonded warehouse beyond the aforesaid period additional storage / insurance cost will have to be borne by the Bank. Therefore, Branch should ensure disposal of gold held in the bonded warehouse within the stipulated period as stated in consignment agreement/informed by supplier while accepting order. .

(i) A confirmation to having received the gold should be sent by the branch to the overseas supplier.

14. Other Operational Details: (a) Customers will submit their request for release of gold on loan

basis. Branch to obtain Bullion Credit Agreement as per format.

(b) Branch to ensure that the necessary formalities like margin requirements etc. are complied with.

(c) Gold will be delivered to the customer after preparing gold loan challans and after obtaining acknowledgement from the customer for having received the gold.

(d) Customer-wise loan ledger will be maintained and delivery effected will be recorded in this ledger.

(e) At the end of the day the details of delivery effected on gold loan basis will be informed to the suppliers / Treasury branch.

(f) The record in customer wise loan ledgers will be in kg. bars and the daily products will be calculated in quantity of gold. For recovering interest the aggregate of the products so arrived

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during the month will be multiplied by average London AM fixing rate. For this purpose simple average of London AM fixing rate (during the month), for 28/30/31 days as the case may be, will be calculated. The interest will be recovered on monthly basis or at the time of closure of loan when there is no other gold loan outstanding...

(g) The interest to be paid to the overseas supplier will be on a calendar month basis. Besides, the supplier will also charge a premium per ounce to cover their overheads, which will be included in the purchase price.

15. Documents to be submitted by Exporter: After effecting exports, the customer will submit:-

Shipping bill triplicate copy.

Invoice copy certified by customs.

These details to be obtained for each and every challan issued at the time of effecting delivery of goods.

The final invoice will be prepared after price fixing.

The reconciliation of branch records with the suppliers will be carried out on fortnightly basis.

16. Reporting: a. Monthly statement to be submitted to customs authorities as

per the requirements of Bond and the proof of exports. b. Branches to report to DFB&IBD the following details:




On loan basis --

Closing balance -- 17. Delegation of sanctioning powers:

a. The powers as applicable to sanction of working capital facilities as well as against Bank Guarantees / 110% cash margin would be exercised by Regional Office Level Credit Committee(RLCC)/Zonal Office Level Credit Committee (ZLCC)/Credit Approval Committee-I and II at Central Office as per the ‘Scheme of Delegation for Loaning Powers’. Though, the initial sanction of facility will be done at Zonal Office / Field General Manager's Office the subsequent renewal of limits will be done at Regional Office.

b. Approval from GM, DFB&IBD, C.O. to be obtained for

selection of all new customers for loan transactions.

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18. Other Conditions :

a) Gold loan is to be subject to Capital Adequacy, Statutory Reserve requirements and other prudential norms as stipulated by Reserve Bank of India from time to time.

b) Branches should ensure end-use of gold loans to jewellery exporters and adhere to KYC guidelines.

c) The Standby LC / LG should cover at all times the full value of the quantity of gold and the agreed margin. The Standby LC / LG should be issued by Scheduled Commercial Bank to whom Bank has approved Counter Party limits and should be in favour of our Bank. The Designated branch should correctly capture the details of the Bank against whose Standby LC/LG, gold loan advance is granted. Such details are required to be captured in Finacle system to monitor counter party exposure limit. The Branch should also separately report details of Standby LC/LG to DFB&IBD.

d) The exposure assumed by extending Gold Loan against Standby LC/LG of another bank will be deemed as an exposure on the guaranteeing bank and attract appropriate risk weight as per extant guidelines.

e) Branches should calculate exposure and should comply with prudential norms by converting into Rupees the gold quantity lent, as per the gold rate published in daily card-rate sheet.

19. Amendment to the Policy :

The policy can be amended from time to time based on the business requirements and regulatory guidelines. Such amendment, including the increase of exposure limits, eligibility criteria, security, interest rate etc. will be approved by Chairman & Managing Director or in his absence Executive Director.