Module: | KYC, NPAs, Advances & Investment Valuations
Q200: Scenario: Three borrowers successfully repay their loans, but face distinct issues. Borrower X's original property documents are lost by the bank. Borrower Y is waiting for the release of his pledged gold collateral. Borrower Z defaulted, forcing the bank to auction his gold collateral. Based on RBI guidelines, consider the following regulatory actions:
1. The bank must release Borrower Y's pledged gold collateral on the same day, but in any case, not exceeding a maximum period of 7 working days.
2. For Borrower X's lost property documents, the bank must pay a compensation of ₹5,000 per day, calculated strictly after a total grace period of 60 days.
3. The bank must set the initial reserve price for Borrower Z's gold collateral auction at not less than 85 percent of its current market value.
4. Banks are permitted to mandate legal representation for the release of other assets of deceased borrowers even if there are no disputes.
Which of the statements given above is/are correct?
2. For Borrower X's lost property documents, the bank must pay a compensation of ₹5,000 per day, calculated strictly after a total grace period of 60 days.
3. The bank must set the initial reserve price for Borrower Z's gold collateral auction at not less than 85 percent of its current market value.
4. Banks are permitted to mandate legal representation for the release of other assets of deceased borrowers even if there are no disputes.
Which of the statements given above is/are correct?
✅ Correct Answer: A
The correct answer is A. Statement 1 is correct: The asset release guidelines mandate the release of gold or silver collateral within a maximum of 7 working days upon full repayment of the loan.
Statement 2 is correct: The operational instructions stipulate that if the bank loses original property documents, the standard 30-day timeline is extended by a further 30 days (total 60 days grace period) to obtain duplicates, after which the ₹5,000 per day penalty activates.
Statement 3 is incorrect: The auction rules dictate that the initial reserve price for gold auctions SHALL NOT be less than 90 percent of its current market value.
The 85 percent threshold is only permitted after two consecutive failed auctions.
Statement 4 is incorrect: The regulatory framework strictly forbids banks from insisting upon legal representation to release other assets of deceased borrowers when there are no underlying disputes.
Statement 2 is correct: The operational instructions stipulate that if the bank loses original property documents, the standard 30-day timeline is extended by a further 30 days (total 60 days grace period) to obtain duplicates, after which the ₹5,000 per day penalty activates.
Statement 3 is incorrect: The auction rules dictate that the initial reserve price for gold auctions SHALL NOT be less than 90 percent of its current market value.
The 85 percent threshold is only permitted after two consecutive failed auctions.
Statement 4 is incorrect: The regulatory framework strictly forbids banks from insisting upon legal representation to release other assets of deceased borrowers when there are no underlying disputes.