**Policy Summary: Enhanced Loan-to-Value Ratio for Gold Loans**
This circular, RBI/2020-21/19 DoR.No.BP.BC.621/04.04.048/2020-21 dated August 6, 2020, issued by the Reserve Bank of India (RBI) to all Scheduled Commercial Banks, including Regional Rural Banks, addresses loans against gold ornaments and jewellery for non-agricultural end-uses.
The policy temporarily revises the Loan-to-Value (LTV) ratio. To mitigate the economic impact of the Covid-19 pandemic, the permissible LTV for these loans has been increased from 75% to 90%. This enhanced LTV is applicable until March 31, 2021, providing borrowers with increased liquidity during this period. Fresh gold loans sanctioned on or after April 1, 2021, will revert to the standard LTV ratio of 75%. All other terms and conditions outlined in circulars DBOD.No.BP.BC.27/21.04.048/2014-15 dated July 22, 2014, and DBR.RRB.BC.No.53/31.01.001/2016-17 dated February 16, 2017, remain in effect.
For further information, contact Saurav Sinha, Chief General Manager-in-Charge.
Key Entities Referenced
Reserve Bank of India (RBI): The central bank of India, the issuing authority of the circular.
Scheduled Commercial Banks: Banks regulated by the RBI and included in the Second Schedule to the Reserve Bank of India Act, 1934.
Regional Rural Banks: Regional Rural Banks in India.
DBOD.No.BP.BC.27/21.04.048/2014-15 July 22, 2014: RBI circular regarding loans against gold ornaments and jewellery.
DBR.RRB.BC.No.53/31.01.001/2016-17 dated February 16, 2017: RBI circular regarding loans against gold ornaments and jewellery.
COVID-19: The coronavirus disease, the pandemic cited as a reason for the LTV ratio change.
Loan to Value Ratio (LTV): The ratio of the loan amount to the appraised value of the asset, in this case, gold ornaments and jewellery.
Saurav Sinha: Chief General Manager-in-Charge at Reserve Bank of India.
RBI/2020-21/19
DoR.No.BP.BC/6/21.04.048/2020-21 August 6, 2020
All Scheduled Commercial Banks
(Including Regional Rural Banks)
Madam/Dear Sir,
Loans against Gold Ornaments and Jewellery for Non-Agricultural End-uses
Please refer to the circulars DBOD.No.BP.BC.27/21.04.048/2014-15 July 22, 2014 and
DBR.RRB.BC.No.53/31.01.001/2016-17 dated February 16, 2017. Under the extant
guidelines, loans sanctioned by banks against pledge of gold ornaments and jewellery
should not exceed 75 per cent of the value of gold ornaments and jewellery.
2. With a view to further mitigate the economic impact of the Covid19 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. This enhanced
LTV ratio will be applicable up to March 31, 2021 to enable the borrowers to tide over
their temporary liquidity mismatches on account of COVID 19. Accordingly, fresh gold
loans sanctioned on and after April 1, 2021 shall attract LTV ratio of 75 per cent.
3. Other terms and conditions of the above-mentioned circulars shall remain applicable.
Yours faithfully
(Saurav Sinha)
Chief General Manager-in-Charge