The RBI has 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% to 90%.
Good news for those willing to take a loan against gold ornaments and jewellery. With a view to further mitigate the economic impact of the COVID-19 pandemic on households, entrepreneurs and small businesses, the RBI in its policy meet has 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% to 90%. This relaxation shall be available till March 31, 2021.
Commenting on the RBI policy announcement, Deepthi Mary Mathew, Economist at Geojit Financial Services, said,”RBI acted judiciously by keeping the rates unchanged. The surplus liquidity in the banking sector and expectation of inflation rate to remain at the elevated levels in Q2FY21 guided RBI’s decision. One of the major announcements was with regard to raising LTV for gold from 75% to 90%. This would be beneficial to the Indian households in the wake of rising gold prices.”
Some financial experts said that with this move, households will be able to get more funds by taking a loan and not be forced to sell gold to get more liquidity.
Divam Sharma, Founder, Green Portfolio, a Portfolio Management Services, said, “The Gold Loan LTV raised to 90% from the current 75% is a big positive for banks and NBFCs offering gold loans and will give the SMEs and small business borrowers the much-needed liquidity in this unprecedented pandemic situation. Households will be able to get more funds by taking a loan and not be forced to sell gold to get more liquidity. Gold loans can see a bump up at a similar rate as seen in the past 6 months due to the continuing rise in gold prices.”
It may be noted that a per the current guidelines, loans sanctioned by banks against pledge of gold ornaments and jewellery for non-agricultural purposes should not exceed 75% of the value of gold ornaments and jewellery.
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