In its MPC statement released on August 6, 2020, the RBI relaxed guidelines for gold loans, enhancing loan to value ratio for gold loans to 90%. Loan to value for loans to 90% will be provided for the jewellery sector, said RBI governor Shaktikanta Das. This relief will be effective till March 31, 2021.
As per current norms, up to 75% of the gold value can be lent out. Amid the pandemic when people are facing cash crisis, gold loan has become the most popular tool of securing funds and banks consider them safer than other unsecured loans.
LTV ratio refers to the amount of loan a borrower can get against gold kept with the lender as collateral.