Introduction
The bank's protocol for gold auctions encompasses all aspects relevant to the auction process, outlining the necessary steps for its proper execution. This document delves into the specifics of auction Standard Operating Procedures (SOPs) and outlines actionable measures to be adhered to before initiating any auction. It aims to streamline the gold loan auction process, ensuring conformity with RBI guidelines. The bank may engage third-party vendors or service providers as required to facilitate the auction management process.
Auction Structure
The responsibility for conducting auctions lies with the Recovery Department, with oversight from the internal audit department to ensure compliance with regulatory and internal policies and to prevent fraud. The Credit Operations and Risk team evaluates risk and compliance aspects related to auctions.
Eligible Auction Cases:
1. Gold Loan NPA Cases where Recovery or a bank-approved partner issues auction notices.
2. Cases where the borrower fails to deposit the Margin Amount, and Loan-to-Value (LTV) exceeds 95%.
3. Pledges marked as lien due to NPA or written-off amounts of other product loans.
Deferment of Auction
In line with a customer-centric approach, the bank may grant time extensions for specific customer categories. Auctions falling under certain categories may be deferred either on a case-by-case basis or from each auction.
The following pledge categories are eligible for deferment:
1. Full interest payment by the borrower.
2. Part-payment of interest based on a commitment for payment by the borrower.
3. Any other genuine reasons approved by the Head of Recovery.
Auction Communications
Eligible auction cases will receive adequate notice of outstanding amounts and auction procedures. In the event of a gold loan account becoming non-performing, the bank holds the right to initiate legal proceedings, including the auction process, after providing a 7-day notice to the borrower.
Auction announcements to the public will be made through newspaper advertisements, issued by the recovery team in collaboration with the marketing function if necessary. Additionally, notices of auction for cases managed through Business Correspondents (BC) may be posted on BC's website on behalf of the bank.
Auction Centers
An auction center is the venue where auctions are conducted, either at the branch level or by consolidating gold at one central location. The Operations team is responsible for identifying suitable auction centers based on various parameters.
Identification of Auction Centre Parameters:
1. Reasons for the need for auction centers.
2. The proposed number of branches to be linked to the auction center.
3. Proximity to proposed branches.
4. Expected bidder participation.
5. Availability of space and necessary facilities, including IT infrastructure and security.
The operations team should be actively involved, and the Head of Operations' approval is required before relocating gold. Auction centers must be well-equipped with personnel, equipment, and infrastructure for smooth auction conduct.
Custody and Movement of Auction Jewelry
Actionable jewelry is transferred to the auction center as per the cash movement schedule, ensuring in-transit insurance. Pledges are accepted in the auction center after weight verification in the presence of branch staff. The bank's authorized personnel validate the total weight, and records are maintained for efficient inventory tracking.
Price Fixation of Auction
The base price of all lots follows RBI regulations, and the reserve price for pledged ornaments must not be less than 85% of the previous 30 working day average closing price of 22-carat gold. Auction centers shall be equipped to handle gold verification and bidding, ensuring transparency and compliance with board-approved auctioneer guidance.
Auction Bidding and Settlement Process
Guidelines for bidder acceptance, KYC compliance, and transparent auction proceedings are established. Authorized bidders with proper documentation are accepted, and gold verification can be conducted by bidders on the auction date or 1-2 days before the auction, with closed bids collected.
Open bidding is conducted by the auctioneer, with at least two bidders required for a valid auction. The recovery team ensures smooth auction processes, and bid confirmations are made in accordance with company policies. Successful bidders are given 5 days to remit the full bid amount, with extensions subject to approval by the Head of Credit.
Upon remittance, the company generates an invoice and hands over auction items to the bidder, encouraging payment through NEFT/RTGS. Auction pledge settlements are carried out, and the auction surplus is transferred to an auction payable account for refund to clients.
Auction Pledge Settlement Intimation
Customers are informed of auction realization and any surplus or shortfall in their accounts post-auction. Surplus amounts are transferred to the customer's account or refunded, while customers with losses are requested to remit the shortfall.
Other Key Items
Auction Process Audit
Quarterly monitoring of the auction is undertaken by the bank, with the internal audit department reviewing auction center operations. Actions are taken based on identified issues.
Document Maintenance
All auction-related documents are retained at auction centers and moved to the head office only during audits or inspections. Scanned copies of documents are available centrally with the recovery department, and records of all auctions are maintained for reference.
