New Delhi: The Reserve Bank of India (RBI) has relaxed the ceiling of Rs one lakh on loans for non-agricultural purposes against pledged gold and has left it to the banks concerned to decide on it.
Last December, RBI had permitted banks to provide loans against gold and jewellery with a bullet repayment (total dues on maturity) subject to the loan amount being within Rs 1 lakh.
"Banks, as per their board-approved policy, may decide upon the ceiling with regard to the quantum of loans that may be granted against the pledge of gold jewellery and ornaments for non-agricultural end uses," the RBI said in a circular.
Borrowers can now pledge their gold and get a higher value of loans, provided that the loan-to-value (LTV) ratio does not exceed 75 per cent of the cost of the gold. But these loans have to be for non-agriculture purposes.
RBI said in the release, "We have received representations from banks requesting to increase the prescribed ceiling and to review other conditions applicable for non-agricultural loans against pledge of gold ornaments and jewellery, where both interest and principal are payable at maturity of the loan, especially in view of introduction of LTV ceiling for such loans."