Gold Auction: Standard Operating Procedure

Introduction

Bank’s gold auction policy is covering all points related to auctions and process which are to be followed while conducting the auction. It will cover the details auction SOPs and actionable items which are to be followed before conducting any auction shall standardize gold loan auction process, by defining and aligning processes in line with RBI guidelines on auction. The Bank may choose to employ third party vendors or service providers as deemed necessary to support the auction management process.

Structure of Auction

Recovery Department shall be responsible for the conduct of auction. Internal audit department shall monitor the auction operations to ensure regulatory and internal policy compliances and fraud prevention. Credit Operations and Risk team shall evaluate the risk and compliance aspects related to auctions.

Eligible Auction Cases:

All Gold Loan NPA Cases where the Auction Notices are being send by the recovery team or a partner on behalf of the bank with the content as approved by the bank with the logo of the bank and the partner
All Cases where Margin is asked by the borrower and borrower has failed to deposit the Margin Amount and LTV is > 95%
Pledges marked lien due to NPA /written off amount of other product loan.

Deferment of Auction

With customer service focus, Bank may grant time extension for certain category of customers. Below category auction may be deferred from each auction or on a case-to-case basis.

Following category of pledges shall be deferred:

Full interest payment by the borrower
Part payment of interest based on commitment for payment by the Borrower
Any Other genuine reasons as approved by the head of recovery

Auction Communications

Eligible cases of auction shall be provided adequate notice of the outstanding and auction procedures to the borrower.

In case any gold loan account becomes NPA, bank has the legitimate right to initiate legal proceedings against the borrower and/ or sell the ornaments pledged through an auction process by giving 7 day’s prior notice to the borrower at the address given in the application for loan and appropriate the amount so received towards the loan amount interest and other charges. This notice to be send by the centralized recovery team and record of the same is to be properly maintained along with POD details.
The auction will be announced to the public through advertisement published in newspaper which will be issued by the recovery team with the help of the marketing function if required.
Mark to market loss pledges: Pledges identified with Mark to Market loss shall be instructed to rectify the position within 7 days through SMS/email/Notice.
List of Auction cases shall be displayed on the notice board, on bank’s websites, URL to be specified in borrower’s copy.
The cases which are managed through BC the notices of auction can be put up on BC’s website on behalf of the Bank.

Status of delivery of registered letters shall be tracked and monitored by recovery team. Further Status Record for SMS and email and Notices to be saved and kept for any future reference if required.

Auction Centers

The auction center is the place where the auction will be conducted. Auction can be done at the branch level or collectively the gold may be moved to once branch or cluster or any other central location for conducting the auction. Where the auction will be conducted that place will be called as auction center.

Identification of Auction Centre

If auction place is other than the branch and combined auction to be done at one place, then auction centers shall be identified by Operations team. Operations Team will do the evaluation of parameters such as proximity with branches, availability of infrastructure facilities for conducting the auction. Basis this feasibility check the auction centers shall be shortlisted.

Following parameters shall be considered while identifying auction centers:

Reasons for requirement of auction centers
Proposed number of branches to be tagged against the auction center
Proximity with the proposed branches
Expected bidder participation
Space availability
Facilities required- IT infrastructure, staff requirements, physical assets, security infrastructure
Movement of Gold is to be recorded and all safety measure are to be followed while shifting of Gold.
Operations team should closely involve in this activity and Operation Head proper approval is to be taken before shifting of Gold

Facilities at Auction Centers

To ensure smooth and efficient conduct of auction, auction centers shall be equipped with adequate people, necessary equipment and other infrastructure requirements

Adequate manpower based on the volume of gold handled- Auction coordinator and 1-2 staff for supporting the operations based on the volume.
weighing machines is to be available balances based on the volume of gold handled
Purity analyzers (if required)
Safe/ Strong room for safe keeping of gold received in auction centers
All necessary registers and document formats
Any one nominated person from Recovery/ Operations/ Credit / Audit is to be available at the time of Auction.

Custody and Movement of Auction Jewellary

Actionable Jewellary shall be moved to auction center as per the cash movement schedule. Operation team to ensure that in-transit insurance for the packets is done and admin team is informed for necessary facilitation of guards and vehicle.

Transfer shall only be made as per the Cash transfer policy
Pledges shall be accepted in auction center after verifying the weight in the presence of branch staff. Bank’s authorized person would subsequently validate total weight and items. Receipt of pledges and verification of weights shall be recorded for ensuring efficient tracking of inventory.

Price Fixation of Auction

Base price of all lots shall be in accordance with RBI regulations. The reserve price for the pledged ornaments shall not be less than 85% of the previous 30 working day average closing price of 22 carat gold for the preceding 30 days as quoted by the India Bullion and Jewellers Association Ltd. [Formerly known as the Bombay Bullion Association Ltd. (BBA)] and value of the jewellery of lower purity in terms of carats shall be proportionately reduced.

The Reserve prices for the pledged will be fixed by recovery head and approved by Audit team. Initial bid price shall be fixed as 22 Carat market price for ornaments.

Approval of auction shall be done by Recovery head and if any deviation then to be approved as per the matrix given below:

Less than or equal to 5%	Recovery Head
Above 5% and up to 10%	Head – Credit/ Head – FIG based on recommendation of Recovery Head
Over and above 10%	CFO based on recommendation of Recovery Head

Auction Bidding and settlement Process

To provide guidelines on acceptance of bidders including KYC compliance and to ensure auction proceedings are conducted in a fair and transparent manner under the guidance of board approved auctioneer.

Bidder acceptance

Persons with adequate documents shall be accepted as bidders. Bank has laid down policies for participation of authorized representatives of bidders. Following shall be considered while allowing authorized participants:

KYC to be collected of the bidder
KYC details of authorized representatives shall be collected, and Authorization can be a fixed period or for each individual auction
The borrower, if he chooses, can participate in the auction process complying with the conditions stipulated by the bank.

Gold verification and Bidding

Bidders shall be permitted to verify the gold placed for auction as on auction date or 1-2 days prior to auction dates on remittance of EMD amount. Gold verification by bidders shall be in presence of auction centre staff or any other person nominated or internal auditor. Closed bids shall be collected from bidders and retained.

Open bidding shall be conducted with all bidders and shall be conducted by auctioneer in of auction centre staff or any other person nominated or internal auditor. Auction shall only be conducted with at least 2 bidders. Recovery team is responsible for the smooth conduct of the auction process. However, confirmation of bids shall be according to company policies and after obtaining adequate approvals. Unsuccessful bidders shall be refunded the EMD by NEFT and RTGS and bidders who have given Demand Draft, the same Demand Draft would be returned.

Auction centers shall maintain adequate records for all transactions in auction center capturing attendance of auctioneer, participation of bidders, EMD collection and refund, bids made by bidders.
Minutes of Auction Proceedings should be prepared by Auctioneer.
Successful bidder shall be provided 5 days for remitting the full bid amount. EMD remitted by the bidder shall be adjusted as an advance and bidder shall be issued a bid confirmation.
Any extension in payment can be approved by Head- Credit not exceeding 7days.
In the event of cancellation of bids or non- remittance of bids, EMD amount shall be forfeited based on approval from Legal Head.
In case of no bidding from bidder, the EMD amount is refunded back

Auction items handover to Bidder

On remittance and realization of full auction amount, company shall generate invoice and handover the auction items (lot) to the bidder. Company shall encourage remittance of auction amount through NEFT/ RTGS. A confirmation from bidder regarding handover and takeover of auction items (lot) shall also be maintained in auction centers for records.

The proper Invoice along with GST to be issued in favour of the Bidder by accounts department.

Auction pledge settlement

On receipt of auction amount and release of lots, Bank shall settle the customer accounts. All charges incurred for auction including charges for notices shall be charged to the customer account.

Auction amount shall be apportioned to pledges based on the net weight assigned by auditors. Outstanding principle, interest and charges shall be deducted from the realization. If any surplus remains, it shall be adjusted against other pledges of the customer. It shall be adjusted in the following manner:

All Auction charges and recovery charges are to be adjusted
Outstanding interest and loan amount is to be adjusted in the Loan which is being auctioned
Rest amount is to be adjusted in any other loan of the customer if he is having other loan with bank

Auction surplus is to be transferred to an auction payable account, where this money is refunded back to the clients.

Auction pledge settlement intimation

Bank shall intimate the customers of auction realization and surplus/loss in his/her account post auction. In case of surplus, customer shall be requested to visit branch to initiate an online transfer and if he does not reach Bank then the amount is to be transferred to customers saving account maintained with Bank or the account where the original loan is being disbursed and further in case of losses customers shall be demanded to remit the shortfall. Bank shall provide all details to customers such as principal outstanding, interest outstanding, charges, amount realized from auction and any adjustments to other live pledges of the customer.

Other key Items

Auction Process Audit

Bank shall undertake quarterly monitoring of auction. Internal audit department shall conduct a review of auction centers operations. Internal audit department shall consolidate the issues identified and shall take necessary actions based on the severity of the issues identified.

Document Maintenance

All documents relating to auction shall be retained at auction centers and shall only be moved to Head office in case of any audit or inspection. Auction center shall also maintain a record of documents retained at the center. Scanned copies of documents collected in auction centers such as Bidder KYC and Authorization letter will be available. The record of all auctions is also to be maintained centrally with the recovery department of the Bank.

Process flow for Auction through BC

Sr. No.	Process Activity	Responsibility
1.	Eligible Auction able accounts are identified basis the DPD and MTM of the loans. 90+ DPD, LTV < 95% loans are identified. Identified account details to be shared with SSFB. BC to send auction notices to such customer on behalf of <>SSFB. A copy of such notice to be parked in SFTP (15 days / format for notice alignment)	Gold Loan Ops Team of BC/ Bank
2.	All eligible Auction able accounts under BC partnership will be shared with BC’s Vendor for sending auction notices.	Gold Loan Ops Team of BC
2.	POD tracking for notices to be shared with SSFB for records detailing notices delivered/undelivered and location wise schedule of auction by 2 days prior to auction.	Gold Loan Ops Team of BC
3.	BC’s Ops Team to send the list of unresolved customers to SSFB & informing about the auction and 2 days prior to auction newspaper advt. to be published, in one National News Paper and one in Local News Paper.	Central Gold Loan Ops Team
4.	Basis the mail from BC’s Gold Loan Team and SSFB, Vault custodian to transfer Auctionable packets to auction centre by updating the Gold Movement details in the register. (Prescribed Process to be followed for this gold packet movement)	BC’s team
5.	On receipt of the packets at auction centre/BC’s Branch verifies weight of each & every packet with the weight mentioned for that packet in the system and acknowledge the receipt of the packet.	BC’s Auction Hub/Branch
6.	Auctioneer prepares the lot for the auction, taluka wise segregating BC’s and SSFB loans separately and assign a lot number. Note: Auctioneer is Internal Employee of BC/ Bank	Auctioneer/Bank’s Representative
6.	Local auction team checks resolution of each loan and prepare the physical lot for auction one day before the auction date, post check of weights of each packet	Auctioneer/Bank’s Representative
7.	Auctioneer coordinates bidders for getting details of KYC required, & the Bidder’s inspection date	Auctioneer
7.	On the bidding date prior to showing the gold, Auctioneer gets collects KYC from the bidder.	Auctioneer
8.	Designated employees show the gold to the bidders in the presence of authorized staff & Auctioneer. On the Auction Day Auctioneer selects the highest value or reserve price (as per RBI whichever is higher) as the “floor price” and initiates the bidding process. Note: Auction policy captures details of reserve price, floor price	Auctioneer
9.	On receiving the final bid, Auctioneer sends summary sheet and case wise details of the bid to SSFB for approval for the loans booked under the partnership	Auctioneer
10.	Working file gives details of the Lot number, weight, rate, saleable value, bid received, POS/ foreclosure, loan wise excess /loss	Auctioneer
11.	On receipt of approval e-mail Auctioneer intimates the bidder to pay the balance amount, post receipt of the payment, amount is transferred to collection account of SSFB.	Auctioneer/Bank
12.	Gold is released to bidder on confirmation from SSFB thru a mailer. Loan is closed and tagged as auctioned in system by Bank’s Operations team.	Auctioneer/Bank’s Operations
	Note:
	Amount received in auction is apportioned against the Interest, other charges, POS and balance if any will be refunded to customer. GST Liability for auction on sale of gold need to be accounted separately and also TCS liability on sale of such Gold Auction pertaining to SSFB will be maintained and deposited to government by SSFB. Excess recovery from the sale of gold is to be returned to the customer.
	No GST Tax Invoice will be generated by BC pertaining to loans accounted under SSFB Code.
13	Post closure of the loan BC’s Operations team will send the details of Auction to SSFB with the required details.	BC’s Operations
14	Post Closure BC’s Operations team sends the working via mail to the Legal Team to issue deficit/ refund notice to the customer as the case may be & to the Customer Service Team to send SMS to the customer. In case of availability of bank details of customer in CBS of Bank, refund applicable to be processed by SSFB in the account so captured at the time of loan disbursal. In case no such data or information on bank account is available, cm to be notified thru sms & letter on communication address, so captured in the system. Money to be parked in the collection account within SSFB only and not to be parted anywhere else, till refunded to borrower.	Auctioneer/Legal/CS
15	Incase customer visits the Branch for refund, BC checks the notice & request will be raised to SSFB’s OPS team for refund.	BC’s Operations