If you have taken a loan by pledging your gold jewelery and for some reason have not been able to pay the EMIs, there is no need to panic. Just because you miss an EMI, a bank or finance company may not immediately auction your jewellery. However, if there is persistent non-payment, the outstanding amount may increase and the debt collection process may begin. Whether or not the jewelery will be auctioned depends on your loan agreement, maturity period and the policy of the lending institution.

How many missed EMIs, are jewelery at risk?

Experts say the Reserve Bank of India (RBI) has not set a uniform rule to auction the pledged gold as soon as two, three or six EMIs are missed. If the payment remains overdue for more than 90 days, the loan account may generally fall under the category of NPA i.e. non-performing asset. After this, there is a possibility that the loan recovery process will accelerate and the risk of auction may increase. Note that the remaining period can be calculated from the oldest outstanding installment. For example, if the June EMI is not paid but the July and August installments are paid, the June installment dues will not be discharged. So first attention should be given to paying the old arrears.

How does gold loan recovery process work?

After the loan EMI is missed, the bank or finance company usually takes several steps to recover. However, the day-to-day deadlines are not the same for every bank. In the first 1 to 30 days, the bank may remind you of the payment via phone, SMS or app. According to the agreement, penalties or additional charges may also be imposed. In approximately 30 to 90 days, the bank may send a written reminder or notice to pay the dues. An account can become NPA in 90 or more days and the recovery process can be expedited.

What happens before the auction?

Before the auction, the lender may give warning and necessary notice about the auction of jewellery. The notice period before the auction depends on the relevant contract and applicable regulations. The loan and applicable charges are repaid from the sale proceeds after the auction. The remaining amount should be returned to the customer as per rule.

Can jewelry be returned before the auction?

According to experts, mortgage jewelery should be sold through a transparent auction process. Lenders cannot arbitrarily sell jewelery by ignoring its prescribed procedure. If the customer pays the balance and applicable charges before the end of the auction, he/she may get back his/her jewellery, but the right to get back the jewelery may expire after the end of the auction.

If the gold loan EMI is missed, the mortgaged jewelery is not immediately auctioned. Auction risk depends on the loan agreement, maturity period and lender’s policy. If the account remains outstanding for more than 90 days, it may become an NPA and the recovery process may be expedited. The lender must follow its prescribed notification process prior to the auction. The customer can redeem the jewelery before the end of the auction by paying the due amount and applicable charges.