Mumbai: The Reserve Bank is all set to raise the loan-to-value (LTV) ratio for lending against gold to 85 per cent for loans under Rs 2.5 lakh from the present 75 per cent, Governor Sanjay Malhotra announced on Friday.
Speaking to reporters at the central bank headquarters, Malhotra said the relaxation will come with riders, and pointed out that both principal as well as interest will be included while computing the LTV as against the current industry practice of sticking only to the principal.
“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.
Additionally, the Governor clarified that for small-ticket gold loans, credit appraisal will not be required, and end-use monitoring will only apply to those under the Priority Sector Lending (PSL) category. This simplification of operational norms will reduce paperwork, speed up processing, and lower the compliance burden for lenders.
“There was nothing new in the draft norms on gold loans. We have consolidated all other norms. We have seen that some regulated entities were not following the norms because there was no clarity, hence, we have consolidated it. We will today or by Monday morning release the final guidelines,” Malhotra added.
On the broader policy front, the RBI also cut the repo rate by 50 basis points to 5.50 percent, marking its third consecutive cut in 2025. Alongside, a 100 basis point reduction in the Cash Reserve Ratio (CRR) has also been announced. These moves are expected to inject liquidity into the banking system, encouraging banks to lower deposit rates and expand credit.
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