Now get up to 75% of gold value as loan:RBI

The Reserve Bank of India (RBI) has eased the norms for extending loans against gold jewellery as collateral. It has decided to raise the Loan-To-Value (LTV) cap for loans against the collateral of gold jewellery to 75 % from the present limit of 60% with immediate effect. This means that gold loan companies in India viz. Muthoot Finance, Manappuram Finance, etc can lend up to 75% of the value of gold jewellery deposited with them as guarantee.

The salient features related to RBI’s move to raise Loan-To-Value (LTV):-

• Only intrinsic value of gold to be used to determine the loan value.
• Non-Banking Finance Companies (NBFCs) will have to certify on purity of gold, which will be used to determine the maximum permissible loan and the reserve price for auction.
• The firms can add suitable cautions to protect themselves against disputes on redemption.
• Mandatory ownership verification to be done in cases where the gold jewellery pledged is more than 20gm, through a suitable document explaining how the ownership was determined.
• Firms have to conduct auction in the same town or taluk, in which the branch that had extended the loan is located.
• Disbursement of loans of Rs 1 lakh and above must be done through cheques.