Notification Number: RBI/2020-21/19.
Applicable to: Banking, MSME and Household sector.
Date of issue: 06-08-2020.
Applicable period: Up-to 31st March 2021.
Summary:
Subject-Relaxation in lending of loans against Gold Ornaments and Jewellery for Non-Agricultural End-uses.
Due to the current pandemic situation, whole of the world including the developed nations are currently facing heavy financial crisis. Households are facing distress times. The worst affected sector are MSME’s and new entrepreneurs. In a country like India households having most of their investments in form of gold are in a situation to pledge their gold and jewelleries to obtain loan for carrying their businesses and meeting their essentials.
RBI being the apex authority for financial policy framing, recently have relaxed the norms or restrictions on banks to lend loans against Gold Ornaments and Jewellery.
Earlier Banks can sanction loans only to an extent of 75% of the value, against the pledged gold ornaments and jewellery. With a view to further mitigate the economic impact of the Covid19 pandemic on households, entrepreneurs and small businesses, RBI has 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 per cent to 90 per cent. This enhanced LTV ratio will be applicable up to March 31, 2021 to enable the borrowers to overcome the financial distress. Accordingly, fresh gold loans sanctioned on and after April 1, 2021 shall attract LTV ratio of 75 per cent.
Update given by: Subashree N
Prepared by: Subramanian G