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Gold July 23, 2014 06:51:25 AM

RBI Extends the Loan Ceiling against Gold Ornaments and Jewelry

Paul Ploumis
ScrapMonster Author
Reserve Bank of India during Tuesday relaxed the loan ceiling of Rs 1 lakh that a bank can grant against pledging of gold ornaments.

RBI Extends the Loan Ceiling against Gold Ornaments and Jewelry

NEW DELHI (Scrap Monster): Reserve Bank of India during Tuesday relaxed the loan ceiling of Rs 1 lakh that a bank can grant against pledging of gold ornaments.

Now borrowers can pledge their gold jewelry and get higher amount as loan if the Loan to Value (LTV) ratio does not cross 75 pct of the gold cost. But the loan purpose should be other than agricultural purposes.

This move is for monetizing the household gold in India. As per RBI notification on December 2013, loan ceiling was up to Rs 1 lakh against the pledge of gold jewelry.

RBI said in the new notification that banks might decide upon the loan ceilings for non agricultural end users which granted against the pledge of gold ornaments as per their Board approved policy.

The Reserve Bank of India has received many requests from banks to extend the loan ceiling and to review other applicable conditions for the loan against the pledge of gold jewelry, where both the principal and interest are payable at maturity.

RBI said the term of such loan should not exceed 12 months from the loan sanction date. The LTV should be at 75 pct throughput the loan tenure. This means that a bank will grant loan to the borrower only to the extent of 75 pct of the value of gold pledged.

RBI said that the interest would be charged on monthly basis and if the account is a ‘standard account’, the interest might be considered on accrual basis. The apex bank added that this new regulation was applicable to the existing loans as well.

 

 

 

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