Madras High Court closes plea to regulate gold loans and auction of pledged jewellery
Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan dispose of the case after recording RBI’s statement that it had already issued necessary circulars
The Madras High Court dismissed a public interest litigation petition seeking regulation of non-banking financial institutions that lend money using gold jewellery as collateral, and auction the pledged jewels in cases of default. Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan dismissed the case after hearing from the Reserve Bank of India (RBI) that it had issued necessary directions and guidelines for fair practices in such lending activities.
The court accepted that RBI acts as the central bank responsible for regulating the country's currency and credit system, and has the authority to supervise and control the activities of non-banking financial institutions. The RBI counsel stated that the central bank had issued a circular in 2006 prescribing broad guidelines for fair practices, and subsequently issued a 'Master Direction' in October 2023 detailing the dos and don'ts for gold loan and the auction of pledged gold.
The court accepted that RBI had been updating these guidelines periodically, and urged the dismissal of the petition.
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