Bankers have a right of general lien on all securities and they can keep the jewels as security. There is no confiscation involved as you have pledged/bailed the jewellery.
If you have already cleared the gold loan, issue a notice under CP Act to Bank stating that jewels are Sreedharan presented by wife's parents and the borrowed amount was used for family necessities and attaching jewelry of wife for a personal loan may spoil your married life. You can also demand that copy of the general lien form. (Once there were decisions that Jewels pledged for a specific purpose can not be taken as security for commercial transactions and the District Forum decisions were reversed several decades back). Without issuing notice, exercising general lien is also not proper on part of the bank. and there is certainly a deficiency of service by Bank.
Depending on the response, search in google with keywords: "Retaining of jewels after repayment of the gold loan as security for some other loan by Banks" and find out the latest position and experiences of others.
My personal opinion is that we build relations with a bank with great difficulty, once we follow credit discipline, there is no need for controversies and a need for such CIBIL score. I advise for the repayment of personal loan as it has to be paid today or tomorrow (though bank is never justified in demanding early closure)..
