Business / Loans against gold by banks enhanced to 90% of value till March 2021

The Hindu : Aug 06, 2020, 02:00 PM
New Delhi: The Reserve Bank of India (RBI) has enhanced the amount of loan that banks can give against the pledge of gold ornaments and jewellery for non-agricultural purposes from 75 per cent of the value of gold pledged to 90 per cent.

This relaxation in loan to value (the amount of loan that can be obtained as a percentage of the value of gold pledged) is available till March 31, 2021.

“With a view to mitigating the impact of Covid-19 on households, it has been decided to increase the permissible loan to value ratio (LTV) for such loans to 90 per cent,” RBI Governor Shaktikanta Das said.

The Governor’s statement was silent on whether this limit would be available for gold loan companies.

This move to enhance the LTV for banks comes in the backdrop of huge increase in demand for gold loans in the backdrop of the pandemic and increase in price of the yellow metal.