RBI Eases Gold Loan Rules Upto Rs 2.5 Lakh: How To Apply, Eligibility Criteria, More

RBI Eases Gold Loan Rules: The Reserve Bank of India Governor Sanjay Malhotra on Friday relaxed gold loan rules upto Rs 2.5 lakh. From now onwards, the central bank is likely to increase the Loan-to-Value (LTV) ratio for gold loans up to Rs 2.5 lakh from 75% to 85%. The announcement was made hours after Sanjay Malhotra announced a jumbo rate cut of 50 basis points on Friday.

Sanjay Malhotra, during the press conference, said that gold loan rates relaxation will come as a part of RBI's attempt to make gold loan lending easier for small-ticket borroewers.

"The LTV was 75 per cent till now. We are expanding it to 85 per cent for small loans of below Rs 2.5 lakh per borrower," Malhotra said, adding that this will be included in the final regulation on gold lending which has been in the works for some time.

Sanjay Malhotra also said that the revised norms would help banks in regulating the category in a better way with minimum risk. The LTV ratio will be around 75% in case of state-owned lenders for both interest and principal amount. However, the LTV ratio was stretched till 88%, said Malhotra on Friday.

What is Gold Loan LTV?

A gold loan to value (LTV) ratio is a financial metric which enables the lender to identify the value of the gold article and the amount which is supposed to be lend to the borrower. Gold LTV is the proportion of a loan relative to the market value of the gold article which has been provided as collateral. As the RBI has increased gold LTV ratio from 75% to 85% for amount up to Rs 2.5 lakh, people can get upto 85% value of their gold article (not more than Rs 2.5 lakh).

Gold Loan Rules Eased: How To Apply?

As the gold loan rates have been eased for small-ticket loan, here are key aspects you need to know about gold loans including rules to apply and eligibility criteria.

-Contact nearest branch of your preferred bank or a gold loan NBFC. Make sure to bring the gold you wish to provide as collateral.

-Bring your ID proof, address proof and certificate for gold (if applicable).

-Talk to the branch manager or representative and inqurie about the loan interest rate, tenure and other mandatory conditions related to gold loan.

-Get your gold loan approved after producing all the required documents.

The process for applying for gold loans may vary from bank to bank. Whereas, gold loan application process may be different for NBFCs as well.

Gold Loan Eligibility

The gold ornament, which borrower wishes to keep as collateral, must have a purity of atleast 18 karat. The gold article which can be kept as collateral can be jewellery, ornaments or coins. Eligibility criteria for gold articles may also vary from banks to banks and NBFCs as well. The gold loan applicant should be older than 18 years of age and must be an Indian resident.