Gold Loans Just Got Bigger! RBI’s 85% LTV(Loan-to-Value) Rule Reshapes Lending Norms

Image Source: Times Now

The Reserve Bank of India (RBI) has announced a major policy shift, increasing the LoantoValue (LTV) ratio for gold loans up to ₹2.5 lakh from 75% to 85%. This move aims to ease liquidity constraints for small borrowers, particularly in rural and semiurban areas, where gold loans serve as a key financial lifeline.

Key Highlights:

Higher Loan Amounts: Borrowers can now receive ₹85,000 for every ₹1 lakh worth of gold pledged, up from ₹75,000 earlier.
Credit Appraisal Relaxation: The RBI has removed income assessment requirements for loans below ₹2.5 lakh, simplifying access for lowincome households.
EndUse Monitoring: Stricter monitoring will apply only to loans under Priority Sector Lending (PSL), ensuring faster approvals for general borrowers.
Auction & Collateral Rules: Lenders must return pledged gold within seven days of loan closure, failing which borrowers will receive ₹5,000 per day in compensation.
Implementation Timeline: The new norms will take effect from April 1, 2026, covering banks, NBFCs, cooperative banks, and housing finance companies.

With this progressive reform, the RBI aims to enhance financial inclusion, ensuring greater access to formal credit while reducing reliance on unregulated lenders.

Sources: Business World, Financial Express, The Hindu