RBI hikes LTV limit on gold loans to mitigate impact of COVID-19 – Here is all about the new guidelines on gold loans

New Delhi: Announcing the bi-monthly Monetary Policy on August 6, the Reserve Bank of India noted that the disruptions caused by COVID-19 have led to increased financial stress for borrowers across the board, creating a huge challenge of their debt burden.

Accordingly, the Central Bank has to decided to provide a window under the June 7th Prudential Framework to enable lenders to implement a resolution plan in respect of eligible corporate exposures – without change in ownership – as well as personal loans, while classifying such exposures as standard assets, subject to specified conditions.”

For the personal loans borrowers, it must be understood that loans taken as gold loan, home loan, car loan, personal loan, education loan, loan against securities and consumer durable loan are categorised under the broad spectrum of “personal loans”.

Additionally, the RBI in its latest decision has hiked the LTV limit on gold loans to mitigate impact of COVID-19

What does the RBI decision on Loan on Gold mean?

As per extant guidelines, loans sanctioned by banks against pledge of gold ornaments and jewellery for non-agricultural purposes should not exceed 75 per cent of the value of gold ornaments and jewellery. RBI said, with a view to mitigating the impact of COVID-19 on households, it has been decided to increase the permissible loan to value ratio (LTV) for such loans to 90 per cent. This relaxation shall be available till March 31, 2021.