Now, you can borrow more against gold jewellery1 min read . Updated: 06 Aug 2020, 01:28 PM IST
- According to new guidelines, 90% of the value of gold can be lent
- This relaxation will be effective till March 31.
The Reserve Bank of India today eased the gold loan guidelines which will enable lenders to give more loan against jewellery. According to current RBI regulations, up to 75% of the value of the gold can be lent. According to new guidelines, 90% of the value of gold can be lent. This relaxation will be effective till March 31.
"As per the extant guidelines, loans sanctioned by banks against pledge of gold ornaments and jewellery for non-agricultural purposes should not exceed 75% of the value of gold ornaments and jewellery. 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% to 90%," the RBI said.
Amid the coronavirus crisis, gold-backed loans are becoming more popular with banks, which tend to consider them safer than other unsecured borrowing.
The Reserve Bank of India expects to contract this financial year as the pandemic ravages activity worldwide, and there are growing concerns that people will struggle to repay riskier business and personal loans.
Apart from gold loan companies, several state-owned and private banks are also coming out with promotional offers around gold loans to lure customers.
George Alexander Muthoot, managing director at gold-financing company Muthoot Finance, recently said that he was seeing demand "from all quarters" as people took out short-term loans to tide over uncertainties. He said the average gold loan was around ₹40,000.
The NBFC launched an at-home gold loan service recently. Shares of Muthoot Finance were up 4% in noon trade.
A gold loan can help you tide over temporary cash flow problems, but remember to keep the tenure short. Besides processing fees, lenders can also levy valuation charges.
(With Agency Inputs)