The Reserve Bank of India has revised its gold loan policy to help households get better value on their gold when they apply for gold loans. The RBI acknowledged the financial hardship people had to go through in the last few months and had to borrow against their prized assets such as gold.
In a move that will help people meet their liquidity requirements better, the RBI has increased the loan-to-value ratio on gold loans to 90% from 75%. This means that you can now borrow up to 90% of your gold value. This is a positive move that will allow households to borrow more at low rates to manage ongoing liquidity challenges due to the covid-19 crisis.
This is a temporary measure and LTVs on gold loans will revert to 75% from April 1, 2021.
While announcing the revised gold loan policy, the RBI said, “With a view to further mitigate the economic impact of the Covid19 pandemic on households, entrepreneurs and small businesses, it has been decided to increase the permissible loan to value ratio (LTV) for loans against pledge of gold ornaments and jewellery for non-agricultural purposes from 75 per cent to 90 per cent. This enhanced LTV ratio will be applicable up to March 31, 2021 to enable the borrowers to tide over their temporary liquidity mismatches on account of COVID 19. Accordingly, fresh gold loans sanctioned on and after April 1, 2021 shall attract LTV ratio of 75 per cent.”
A gold loan is a secured loan offered against gold articles such as jewellery, bullion etc. You gold articles are pledged as collaterals for the loan. You can take a loan from the bank and non-banking finance companies (NBFCs).
The latest RBI move to increase the LTV to 90% applies to the banks and clarity is awaited about the revised policy being applied on the NBFCs.
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