RBI to raise gold lending LTV to 85% for loans under ₹2.5 lakh: Malhotra

RBI raises gold loan LTV ratio to 85% for loans under ₹2.5 lakh, with interest included in calculation.

The Reserve Bank is all set to raise the loan-to-value (LTV) ratio for lending against gold to 85% for loans under ₹2.5 lakh from the present 75%t, Governor Sanjay Malhotra announced on Friday.

Speaking to reporters at the central bank headquarters, Mr. Malhotra said the relaxation will come with riders, and pointed out that both principal as well as interest will be included while computing the LTV as against the current industry practice of sticking only to the principal.

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"The LTV was 75% till now. We are expanding it to 85% for small loans of below ₹2.5 lakh per borrower," Mr. Malhotra said, adding that this will be included in the final regulation on gold lending which has been in the works for some time.

He said the revised norms are aimed at regulating the category in a better way with minimum risk.

The Governor said State-owned lenders have been including both interest and principal while making gold loans under the current LTV limit of 75%, but in the case of some non-bank lenders and smaller banks, the LTV was being stretched till 88%.

A few months ago, the RBI had come out with a draft on gold lending, and Mr. Malhotra made it clear that the draft is just a reiteration and consolidation of all the regulations issued earlier.