What is Gold Loan Auction?

India is one of the biggest consumers of gold worldwide, where almost every household buys gold either for auspicious or investment objectives. Numerous Indians utilize it in a gold loan scheme. However, what happens if the borrower fails to repay the loan to the lender? The resulting situation comes down to a gold loan auction.

What is Gold Loan Auction?

Gold loan schemes are financial products that allow individuals to avail a loan amount by pledging their gold as collateral to the lender. The lender determines the gold value against the current price of the gold in the domestic market and offers a loan amount based on a certain percentage of the gold value. The gold loan offered to the borrower is at an interest rate, which the borrower is liable to repay along with the principal amount over the loan tenure.

However, there may be times when the borrower fails to repay the interest payments or the principal amount to the lender. In such a case, the lender can sell the pledged gold of the borrower to realize the outstanding loan amount due within the repayment tenure.

Once the gold loan becomes a Non-Performing Asset (NPA), they can use the provisions set by the Association of Gold Loan Companies to sell the pledged gold articles through a public auction. Here, the auction is called Gold Loan Auction.

Gold Loan Auction Process In India

Before the auction, lenders must contact borrowers to inform them that their gold articles will be in the auction. After the expiry of such notice, the lender may go ahead and follow the below gold loan auction process:

1. Appointing The Auctioneer

The first step in the gold loan scheme auction is to appoint an auctioneer. It is mandatory that the auctioneer is independent and selected after inviting and screening various applications. Furthermore, the board of directors of the lenders approves the auctioneer

2. Place Of The Auction

Before the auction, the designated place must be set and communicated by the lender. Generally, the gold loan auction is conducted in the town and the branch of the lending company, which initially extended the loan against gold to the borrower

3. Communication For The Auction

The lender must publish the auction notice in two newspapers; one in the local newspaper in the local language and one in the national daily newspaper. The auction notice must contain factors such as the date, time, and place of the auction, along with the included terms and conditions

4. Guidelines

At the time of the auction, the lender must follow certain specific auction guidelines. The lender must communicate the fixed-minimum amount to be recovered, reserve the price for the gold articles, and identify the branch staff and the bidders by collecting their KYC documents. Furthermore, the lender must also display the gold articles to the auctioneers and the bidders before starting the auction

5. Delivery

After the documentation, the highest bidder can take the delivery of the gold articles within three working days from the date of auction. However, the highest bidder can only take the delivery after depositing the bid amount with the lending company. The lender company must give a sell receipt to the bidder and receive a purchase receipt in return

6. Loan Adjustment

After the auction, the sale proceeds are adjusted against the borrower’s account with the lender. They have the right to send a demand notice to the borrower to recover the balance dues if the sale proceeds are lower than the outstanding amount. If the loan proceeds are higher, the borrower is refunded the balance amount

Avail A Gold Loan With IIFL Finance

With IIFL Gold loan scheme, you get industry-best benefits through our process designed to offer instant funds based on the value of your gold within 30 minutes of application. IIFL Finance Gold Loans come with the lowest fee and charges, making it the most affordable loan scheme available. With a transparent fee structure, there are no hidden costs you have to incur after applying for the loan with IIFL Finance

FAQs

Q.1: Is the borrower contacted before the auction?
Ans: Yes, the borrower is informed through every means possible and served an auction notice before the auction takes place.

Q.2: What is the interest rate on IIFL Finance Gold Loans?
Ans: IIFL Finance gold loan schemes come with attractive interest rates ranging between 6.48% - 27% p.a.

Q.3: What documents are required for IIFL Finance’s Gold Loan?
Ans: Documents required are Aadhar Card, PAN Card, Driving License, Passport, Ration Card, Electricity Bill, etc. Visit the IIFL Finance gold loan page to get the complete list of documents to submit.