RBI Eases Gold Loan Norms: LTV Raised to 85% for Small Borrowers, Credit Appraisal Relaxed

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The Reserve Bank of India (RBI) has announced a major relaxation in gold loan regulations, increasing the Loan-to-Value (LTV) ratio from 75% to 85% for loans up to ₹2.5 lakh. This move aims to boost credit access for small borrowers, particularly in rural and semi-urban areas, where gold is widely used as collateral.

The RBI clarified that credit appraisal requirements will be waived for loans below ₹2.5 lakh, easing procedural burdens for both borrowers and lenders. Additionally, the LTV ratio must be maintained throughout the loan tenure, ensuring consistent risk management. For loans exceeding ₹5 lakh, stricter credit assessment norms will apply.

Industry experts believe this decision will enhance liquidity, benefiting NBFCs and banks specializing in gold-backed lending. The move follows concerns raised by financial institutions regarding previously proposed tighter regulations.

Key Highlights:

LTV ratio increased to 85% for loans up to ₹2.5 lakh.

Credit appraisal waived for small-ticket loans, easing access.

LTV must be maintained throughout the loan tenure.

Stricter credit assessment for loans above ₹5 lakh.

Source: The Hindu Business Line | MSN News | Zee Business