Get more from gold, as RBI increases the lending limit against the yellow metal

RBI Governor Shaktikanta Das announced that banks can lend up to 90 per cent of the value of gold. It stood at 75 per cent earlier. This relaxation will be available till March 31, 2021.

So, you can borrow more against your gold jewellery and ornaments from banks. “With a view to further mitigate the economic impact of the COVID-19 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,” said the release.

CVR Rajendran, CEO & MD, CSB Bank expects this move to increase the demand for gold loans. There would be competition among lenders to cater to it. “Lenders will need to ensure that their valuation and risk management processes remain tight and robust,” he says.

Gaurav Gupta, founder and CEO of myloancare.in says, “Though RBI has relaxed the LTV condition, each lender will assess this in the light of its in-house risk management rules, and decide if it wants to lend up to 90 per cent of the gold value. Gold prices ruling at all-time high, may turn a few lenders conservative while giving loans.”

RBI has not made it mandatory to lend up to 90 per cent of the value of the gold. If lenders choose lend up to the full limit, you can raise up to Rs 90,000 against gold worth Rs 1 lakh. Earlier, lenders would have extended loans worth Rs 75,000.

Gold prices have shot up to Rs 55,760 per 10 gm, from Rs 39,270 at the beginning of the year – a 42 per cent rise.

However, fresh gold loans sanctioned on and after April 1, 2020 will attract LTV of 75 per cent.

If you are an existing gold loan consumer looking for more loan, you may get in touch with your lender after this announcement. Gold loans are processed quickly and allow individuals to raise funds at attractive interest rates. However, do not borrow just because lenders are willing to extend additional credit.

Courtesy: Money Control