RBI Proposes Stricter Gold Loan Norms

The norms said the lenders should put in place a ceiling on the loan portfolio secured by eligible gold collateral as a proportion of their total loans and advances, which should be reviewed periodically keeping in view the desired granularity, collection efficiency, realisation performance through auction route, availability of adequate economic capital and concentration risks.

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Tenure of consumption loans in the nature of bullet repayment loans where both principal and interest become due at maturity should be capped at 12 months.

The RBI suggested that the bullet repayment loans by cooperative banks and regional rural banks (RRBs) will be subject to a maximum ceiling of ₹5 lakh per borrower. Bullet repayment loans are loans where the principal is due for repayment at the maturity of the loan.

The RBI said that the maximum loan-to-value (LTV) ratio in respect of consumption gold loans should not exceed 75% of the value of gold. The ceiling of 75% will be applicable to all gold loans sanctioned by non-banking financial companies (NBFCs).

The RBI emphasised that the prescribed LTV ratio should be maintained on an ongoing basis throughout the tenure of the loan.