Re­cent Devel­op­ment – RBI Has Re­laxed Ceil­ing on Gold Loan

Consumer Voice - - Gold Loans -

Last week, the Re­serve Bank of In­dia (RBI) re­laxed the one lakh ru­pees ceil­ing on loans against gold jew­ellery. Bor­row­ers can now pledge their gold and get a higher value of loans, pro­vided that the loanto-value (LTV) ra­tio does not ex­ceed 75 per cent of the cost of the gold. But th­ese loans have to be for non-agri­cul­ture pur­poses. The move is ex­pected to mon­e­tize the house­hold gold hold­ings in In­dia by en­cour­ag­ing peo­ple to bring out their gold hold­ings.

“Banks, as per their board-ap­proved pol­icy, may de­cide upon the ceil­ing with re­gard to the quan­tum of loans that may be granted against the pledge of gold jew­ellery and or­na­ments for non-agri­cul­tural end uses,” RBI said in a no­ti­fi­ca­tion.

In De­cem­ber 2013, RBI had stip­u­lated a ceil­ing of one lakh ru­pees and bul­let re­pay­ment (one-time pay­ment) – that means pay­ment of both the in­ter­est and the prin­ci­pal at one go.

RBI said in the re­lease, “We havve re­ceived rep­re­sen­ta­tions from banks re­quest­ing to in­crease the pre­scribed ceil­ing and to re­view other con­di­tions ap­pli­ca­ble for non-agri­cul­tural loans against pledge of gold or­na­ments and jew­ellery, where both in­ter­est and prin­ci­pal are payable at ma­tu­rity of the loan, es­pe­cially in view of in­tro­duc­tion of LTV ceil­ing for such loans.”

“The LTV of 75 per cent should be main­tained through­out the ten­ure of the loan for all loans ex­tended against pledge of gold or­na­ments and jew­ellery for non-agri­cul­tural end uses. The LTV ra­tio shall be com­puted against the to­tal out­stand­ing in the ac­count, in­clud­ing ac­crued in­ter­est, and cur­rent value of gold jew­ellery ac­cepted as se­cu­rity/col­lat­eral,” RBI said. This ef­fec­tively means that at any point of the ten­ure of the loans the LTV ra­tio should not ex­ceed 75 per cent of the value of the col­lat­eral.

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