Gold Loan Auction Rules in India: What Lenders Must Do and What You Can Do
26 October, 2026 Gold Loan
6 mins read
Learn the gold loan auction rules in India, including notice periods, reserve prices, surplus refunds and steps you can take to stop an auction.
A lender cannot auction your pledged gold the moment you miss a payment. It must give you written notice first, usually at least 14 days before the sale. RBI rules also set a minimum reserve price, require the sale to be public, and require the lender to refund any money left after your dues. You can stop an auction by clearing your dues before the sale date.
This guide explains when an auction can happen, what the notice must say, how the reserve price works, and what to do if you receive a notice.
Gold Loan Auction Rules at a Glance
| Question | Answer |
|---|---|
| Can a lender auction without notice? | No. Written notice must come first. |
| How much notice? | At least 14 days, stating your dues, the auction date and venue, and your right to redeem. |
| Minimum reserve price? | At least 90% of the gold’s market value, measured against a recognised benchmark. |
| Where is the auction held? | In the same town or taluka as the lending branch. |
| What happens to surplus? | After principal, interest and permitted charges are paid, the balance goes to you. |
| How can I stop it? | Repay your dues, or regularise the account, before the sale date. |
| Where do I complain? | The lender’s grievance channel first, then the RBI Ombudsman where applicable. |
When Can a Lender Auction Your Gold?
An auction is a last step, not the first response to a missed payment. Lenders usually send reminders and a demand notice first, and an auction follows only if the loan stays unpaid. Two situations can lead there.
| Trigger | What happens | Safeguard |
|---|---|---|
| Default at maturity | The loan is not repaid when due. A loan overdue by 90 days is classed as a non-performing asset (NPA). | Written auction notice before any sale. |
| LTV breach after a price fall | Gold prices drop and the loan exceeds the permitted loan-to-value limit. The lender may ask for part-payment or extra security. | Notice before any auction; valuation by a recognised benchmark. |
If you are worried about an LTV breach, check where you stand with the gold loan calculator and the gold rate.
How Much Notice Must a Lender Give Before an Auction?
The notice must be in writing and give you at least 14 days before the sale. It should state the amount you owe, the auction date and venue, and your right to redeem the gold. It should be clear and in a language you understand.
For example, if you receive a notice on 1 October, the auction cannot be held before 15 October. The exact counting rules can vary, so ask the branch to confirm the earliest sale date in writing.
How Is the Auction Reserve Price Set?
The reserve price is the lowest price at which your gold can be sold. It must be at least 90% of the gold’s market value, measured against a recognised benchmark such as IBJA rates. Check the exact averaging method in the RBI directions.
For example, if your 22-carat ornaments are valued at ₹60,000, the reserve price cannot be below ₹54,000. This figure is illustrative, not a current price. Ask the lender which benchmark and date it used, and compare it with the day’s gold rate.
If no one bids at or above the reserve price, the lender may advertise and hold another auction. Check whether the RBI directions change the reserve price for a repeat sale.
How Does a Gold Loan Auction Work?
- Written notice. The lender sends you a notice with your dues, the auction date and venue, and your right to redeem.
- Public advertisement. The auction is advertised and held in the same town or taluka as the branch.
- Sale at or above the reserve price. Bidders compete, and the sale cannot close below the reserve price.
- Settlement of dues. The proceeds first cover principal, interest and permitted charges.
- Surplus refund. Any balance is paid to you.
What Happens to the Surplus, or to a Shortfall?
If the auction raises more than you owe, the lender must refund the difference. For example, if the sale fetches ₹1,00,000 and your dues are ₹70,000, you are owed ₹30,000. The directions set a deadline for this refund. If you do not receive it, complain through the lender’s grievance redressal policy.
If the sale raises less than you owe, you may still be liable for the balance. Ask the lender for a written statement of the sale proceeds and your remaining dues.
Can You Stop a Gold Loan Auction?
Yes. You can stop an auction by repaying the full dues, or by regularising the account, before the sale date. Act as early as you can, because your options narrow as the date nears.
- Repay in full. Clear principal, interest and charges, and get a receipt.
- Regularise the account. Ask the branch what overdue amount brings the loan back on track.
- Ask about renewal. Renewing may extend the tenure, but accrued interest usually has to be paid first. See what to expect from the gold loan renewal process.
- Review your repayment options. Gold loan repayment options can help you plan the next payment.
What Should You Do If You Receive an Auction Notice?
- Check the notice. Confirm it is in writing, shows your loan account number and an itemised amount owed, and gives an auction date at least 14 days away. It should also state your right to redeem and the valuation basis.
- Contact your branch the same day. Call or visit your nearest Kosamattam branch and ask for the exact amount needed to close or regularise the loan.
- Ask for everything in writing. Request a statement of dues and the valuation used for the reserve price.
- Pay before the sale date if you can. Keep the receipt. If you cannot pay in full, ask the branch in writing about part-payment or renewal.
- Keep records. Save the notice, receipts, valuation sheet and any messages, in case you need to complain.
How Do You Complain If the Rules Are Broken?
Start with the lender, then escalate to RBI if the problem is not resolved.
- Complain to the lender. Use the grievance redressal policy and attach the notice, receipts and valuation papers. Note the key dates: notice date, auction date and any delay in refunding surplus.
- Escalate to the RBI Ombudsman. If the lender does not resolve the complaint within 30 days, or you are not satisfied with its reply, file a complaint on the RBI complaint portal at cms.rbi.org.in, subject to the applicable complaint requirements.
Do These Rules Apply to Kosamattam Gold Loans?
Yes. Kosamattam Finance is an RBI-regulated NBFC, so RBI’s gold loan directions apply to its auctions. For questions about your account, visit the gold loan page or contact us.
FAQs
Is a 14-day notice mandatory before a gold loan auction?
Yes. The lender must give written notice stating your dues, the auction date and venue, and your right to redeem. If the notice is shorter or unclear, raise a grievance with the lender and, if unresolved, with the RBI Ombudsman.
Can the lender auction my gold without informing me?
No. A written notice and public advertisement are required before the sale. If you were not notified, keep all communications and complain through the lender’s grievance channel.
What happens if no one bids?
The lender may advertise and hold another auction, and you can still repay and redeem your gold before it. The reserve price rules still apply.
How is the reserve price calculated?
It must be at least 90% of the gold’s market value, measured against a recognised benchmark such as IBJA rates.
Do I get money back if the auction raises more than I owe?
Yes. After principal, interest and permitted charges, the surplus must be refunded to you within the prescribed time.
What if gold prices fall and my LTV exceeds the limit?
The lender may ask for part-payment or additional security. If the LTV is not restored, an auction can eventually follow, but only after proper notice.
Can I stop the auction after receiving the notice?
Yes. Repay your dues or regularise the account before the sale date. The lender may also offer renewal or a part-payment plan.
Conclusion
A gold loan auction follows a set process: written notice, a public sale at or above the reserve price, and a refund of any surplus. You can stop it by paying your dues before the sale date. If you are worried about an upcoming payment, speak to your branch before the due date, not after the notice arrives. You can reach Kosamattam through contact us.
This article is general information, not legal or financial advice. RBI rules and lender policies change, so confirm current terms with Kosamattam Finance and RBI. Last reviewed: [26-10-2026].
