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Banks may review LTV ratio as gold slide continues

By Religare
Banks may review LTV ratio as gold slide continues
Falling gold prices may force banks to review their Loan-to-Value (LTV) ratio—the ratio of a loan to the value of gold with the borrower, said a media report.

Gold prices on Wednesday fell Rs 90 to Rs 26,350 per 10g, the lowest level since August 17, 2011, after dropping Rs 3,160 over the last three sessions.

Generally most of the PSU Banks have this LTV ratio at 70 per cent while private sector lenders have a higher ratio. Crash in gold prices may force banks to reduce this LTV ratio which means the amount a borrower gets per gram of gold will be reduced.

SBI chairman also said that bank would raise the margin requirement. "Generally, we keep a 30 per cent limit (of value). Yes, we will have to review that. That (LTV) will be adjusted. We would be revising our advisory for gold loans with the valuations (dropping)," he said.

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