Citizen Voice Coimbatore in a press release has pointed out difficulties arising out in redeeming loan availed from Banks by pledge of gold ornaments. As the gold ornaments are also a liquid asset like deposit, it is suggested that nomination facility may be provided to the borrowers.
Coimbatore: Citizen Voice Coimbatore in a press release has pointed out difficulties arising out in redeeming loan availed from Banks by pledge of gold ornaments.
Presently nomination facility is available for the depositors in the banks for hassle-free settlement of deposits in the event of the death of the depositor. Even if the depositor had taken a loan against the deposit, the deposit amount will be settled to the nominee after the loan is repaid by either the nominee himself or any other person.
As the gold ornaments are also a liquid asset like deposit, we suggest that nomination facility may be provided to the borrowers against which a loan is taken from a bank so that the settlement of the same by the banks will be hassle-free and the layman will be very happy with the quick settlement.
Problems arise when the individual who has availed the loan dies and the loan remains outstanding. In many cases the legal heirs of the individual may not be aware of the existence of such a loan and details of it, until a notice from the bank is received by the client's family. This leads to a situation where the loan remains outstanding and the bank / institution which have extended the loan holds on to the pledged gold without logical closure of the account rendering the loan as NPA.
Whereas in respect of gold ornaments pledged by a person to the bank for taking a loan, the settlement of the gold ornaments is taking a long time and cumbersome, in the event of the death of the borrower as the process involves so many formalities such as production of death certificate, legal heir ship certificate and indemnity by a suitable person etc., Even if any of the close relatives of the borrower is ready to repay the entire loan, still the settlement takes a long time since the same has to be approved by the appropriate authority after production of the items mentioned earlier.
In majority of the cases people do not know the procedure for getting back the ornaments from the bank. When they know they have to run from pillar to post for getting the necessary documents and providing the suitable person for indemnity.
The press release said such a situation can be avoided by insisting on proposing a ‘nominee’’, which is a normal practice for opening bank accounts, fixed deposits etc. In the event of the death of the individual who has taken the loan, the institution which has extended the loan can correspond with the nominee for closing the loan account and receive the pledged gold for onward transmission to the nominee of the deceased.
This would go a long way in avoiding problems in unforeseen circumstances for both the borrower and the lender, the bank. To avoid situations like this, it is suggested to recommend that RBI make/Fin. Ministry, to have the borrower sign a declaration of nomination while availing the loan itself. This declaration should also be signed by the nominee as acceptance of the nomination.
Presently nomination facility is available for the depositors in the banks for hassle-free settlement of deposits in the event of the death of the depositor. Even if the depositor had taken a loan against the deposit, the deposit amount will be settled to the nominee after the loan is repaid by either the nominee himself or any other person.
As the gold ornaments are also a liquid asset like deposit, we suggest that nomination facility may be provided to the borrowers against which a loan is taken from a bank so that the settlement of the same by the banks will be hassle-free and the layman will be very happy with the quick settlement.
Problems arise when the individual who has availed the loan dies and the loan remains outstanding. In many cases the legal heirs of the individual may not be aware of the existence of such a loan and details of it, until a notice from the bank is received by the client's family. This leads to a situation where the loan remains outstanding and the bank / institution which have extended the loan holds on to the pledged gold without logical closure of the account rendering the loan as NPA.
Whereas in respect of gold ornaments pledged by a person to the bank for taking a loan, the settlement of the gold ornaments is taking a long time and cumbersome, in the event of the death of the borrower as the process involves so many formalities such as production of death certificate, legal heir ship certificate and indemnity by a suitable person etc., Even if any of the close relatives of the borrower is ready to repay the entire loan, still the settlement takes a long time since the same has to be approved by the appropriate authority after production of the items mentioned earlier.
In majority of the cases people do not know the procedure for getting back the ornaments from the bank. When they know they have to run from pillar to post for getting the necessary documents and providing the suitable person for indemnity.
The press release said such a situation can be avoided by insisting on proposing a ‘nominee’’, which is a normal practice for opening bank accounts, fixed deposits etc. In the event of the death of the individual who has taken the loan, the institution which has extended the loan can correspond with the nominee for closing the loan account and receive the pledged gold for onward transmission to the nominee of the deceased.
This would go a long way in avoiding problems in unforeseen circumstances for both the borrower and the lender, the bank. To avoid situations like this, it is suggested to recommend that RBI make/Fin. Ministry, to have the borrower sign a declaration of nomination while availing the loan itself. This declaration should also be signed by the nominee as acceptance of the nomination.