Banks should have a suitable
policy for lending against gold jewellery
The Reserve Bank of India
(RBI), on Monday, said that it had been decided to prescribe a loan-to-value
(LTV) ratio of not exceeding 75 per cent for banks’ lending against gold
jewellery, including bullet-repayment loans against pledge of gold jewellery.
“Therefore, henceforth loans sanctioned by banks should not exceed 75 per cent
of the value of gold ornaments and jewellery,” the RBI said in a notification
to all banks.
Further, it has been decided
that gold jewellery accepted as security / collateral will have to be valued at
the average of the closing price of 22 carat gold for the preceding 30 days as
quoted by the India Bullion and Jewellers Association Ltd. [Formerly known as
the Bombay Bullion Association Ltd. (BBA)].
“This would standardise the
valuation’, and make it more transparent to the borrower,” the RBI observed.
“If the gold is of purity less
than 22 carats, the bank should translate the collateral into 22 carat and
value the exact grams of the collateral. In other words, jewellery of lower
purity of gold shall be valued proportionately,” the RBI added.
The central bank reiterated
that banks should continue to observe necessary and usual safeguards, and also
have a suitable policy for lending against gold jewellery with the approval of
their boards of directors.
Value
ratio
PTI reports:
Earlier this month, the RBI had
raised loan to value ratio to 75 per cent from 60 per cent. This was in view of
moderation in the growth of gold loan portfolios of non-banking finance
companies (NBFCs) in the recent past.
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