RBI adds glitter to gold, allows higher loans against jewellery

The Reserve Bank of India on Thursday added additional shine to gold ornaments and jewellery by allowing banks to give loans up to 90 per cent of the value of such items pledged by borrowers.

At present, loans sanctioned by banks against pledge of gold ornaments and jewellery is up to 75 per cent of the value of such items.

The additional loan against jewellery is expected to mitigate the economic impact of the Covid-19 pandemic on households, entrepreneurs and small businesses and help them tide over their temporary liquidity mismatches.

“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,” the RBI said in its circular sent to all commercial banks.

The enhanced LTV ratio will be applicable up to March 31, 2021. Accordingly, fresh gold loans sanctioned on and after April 1, 2021 shall attract LTV ratio of 75 per cent.

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