RBI increases Gold loan amount to 90% of pledged gold value

Published: August 7, 2020

The Reserve Bank of India has relaxed the norms for gold lending in the country and with this; the lenders can now give loans up to the value of 90% of the total value of gold. Previously, this was 75% of the total value of gold jewellery and ornaments.

Details

The central bank has increased the loan-to-value ratio (LTV) for the gold loans to 90% in the monetary policy meeting. Loan-to-Value ratio is the proportion of the value of the collateral value that the lender can finance through the loan.

Significance

This decision will provide liquidity to the cash-strapped borrowers opting for gold loans. The relaxation will be available on the gold loans availed of till 31st March 2021. This decision of the central bank will increase the loan amount sanctioned by around 20%. However, the new norms are going to be applicable for all the new loans; however, the old lenders will also get this facility through top-up loans.

The scenario of Gold Loans in India

The demand for a gold loan has increased significantly after the pandemic set in since more and more cash-strapped borrowers are going for the option of taking gold loans. These loans are secured and the interest rates are lower as compared with the personal loans. Apart from this, the surge in prices of gold has also caused this new interest in the borrowers. They can now get a higher amount from the lenders.

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