Small gold loan LTV increased to 85% from 75%

RBI increases LTV for small gold loans to 85% up to ₹2.5 lakh, clarifies draft regulations for clarity.

The Reserve Bank of India (RBI) has decided to increase the loan to value (LTV) amount for small gold loans of up to ₹2.5 lakh from one borrower from 75% to 85% including interest, RBI Governor Sanjay Malhotra said on Friday. 

He said the final directions on loans given against gold as collateral would be issued on Friday or on Monday.

“First of all the direction was only a draft, it was not final. There is nothing new in the draft direction, it is a consolidation of past regulations and we have recreated it. It was observed that some regulated entities (REs) were not implementing it because it lacked clarity. Because now everything is in black and white, that is why we have been getting comments,” the governor said.

He said the draft makes it clear that at the absence of invoice, one can give a self-declaration and there was no need to worry in that front. More clarity will be provided on the final direction as and when it is published, he said.

“On credit appraisal, it will not be applicable for small loans of upto Rs 2.5 lakh if gold is pledged. End use will only be monitored if benefit is being taken under priority sector lending,” he clarified. He said the LTV formula will be applicable on consumption loans and not on others.   “Today LTV is 75%. For small loans we have increased it to 85% including interest for loans below Rs 2.5 lakh per borrower,” he said.