The Reserve Bank of India (RBI) on Thursday raised the permissible loan-to-value (LTV) ratio for gold loans to 90 per cent from 75 per cent, adding additional shine to gold ornaments and jewellery.
The additional loan against jewellery is expected to mitigate the economic impact of the Covid-19 pandemic on households, entrepreneurs and small businesses and help them tide over their temporary liquidity mismatches.
“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 per cent to 90 per cent,” the RBI said in its circular sent to all commercial banks.
“The relief will be applicable till March 31, 2021,” RBI Governor Shaktikanta Das while he presented key decisions taken by RBI’s Monetary Policy Committee (MPC). Accordingly, fresh gold loans sanctioned on and after April 1, 2021 shall attract LTV ratio of 75 per cent.
The detailed guidelines on this will be issued by RBI later on Thursday.
Meanwhile, the central bank maintained an accommodative stance, which could continue until the economy is fully revived, thus opening up possibilities for more future rate cuts.
The MPC also maintained the repo rate or short-term lending rate for commercial banks, at 4 per cent. The reverse repo rate has also been maintained at 3.35 per cent.