Money & Banking

RBI eases norms for loans against gold

Our Bureau Mumbai | Updated on March 12, 2018 Published on July 22, 2014

Central bank removes the ₹1-lakh limit on non-farm gold loans

The Reserve Bank of India has done away with the ₹1-lakh limit on the amount of non-agriculture loan sanctioned by banks at any point of time against the pledge of gold ornaments and jewellery. Henceforth, banks, according to their board-approved policy, can decide on the ceiling with regard to the quantum of loans that can be granted against the pledge of gold jewellery and ornaments for non-agricultural end-uses, the central bank said in a notification.

This liberalisation follows a representation RBI received from banks requesting an increase in the prescribed ceiling and to review other conditions applicable to such loans.

However, the RBI underscored that the loan-to-value (LTV) ratio of 75 per cent has to be maintained throughout the tenure of the loan for all such loans. LTV is the amount of loan given as a percentage of the appraised value of the pledged security.

The RBI said the tenor of the loan against gold ornaments and jewellery for non-agricultural end-uses, where both interest and principal are due for payment at maturity of the loan, cannot exceed 12 months from the date of sanction.

Published on July 22, 2014
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