The Reserve Bank of India (RBI) announced on Thursday that lending institutions such as banks and non-bank financial corporations (NBFCs) can now lend up to 90% of the value of gold jewelry, raising the cap to 75 % previously. The RBI has increased the LTV (loan-to-value) ratio on gold loans to provide relief to borrowers looking to take gold loans to ease financial demands caused by the coronavirus crisis. Here’s what you need to know:
RBI statement on gold lending
The RBI said: “Under current guidelines, loans sanctioned by banks against pledging gold ornaments and jewelry for non-agricultural purposes should not exceed 75 percent of the value of gold ornaments and jewelry. In order to further mitigate the economic impact of the impact of the coronavirus pandemic on households, businessmen and small businesses, it was decided that the loan-to-value ratio (LTV) allowed for collateral loans of gold jewelry for non-agricultural purposes will increase from 75% to 90%.
Validity of the relaxation
According to the RBI, the easing will only be valid until March 31, 2021.
What is a gold loan?
A gold loan is a loan that you take out for gold. This is a secured loan where gold items such as gold jewelry, bullion etc. are taken as collateral by the lending bank / NBFC.
The loan is given to the borrower against this gold as collateral.
What are the advantages of opting for a gold loan?
A gold loan is similar to a personal loan in that it meets your immediate financial needs, whether it is international education, wedding expenses, medical emergency coverage, or any other purpose. staff. However, unlike a personal loan, it is a secured loan with your gold item as collateral and carries a lower interest rate.
Fast processing: Gold loans require minimal documentation, thanks to its secure nature, which leads to faster processing.
Flexibility: As there is no end use tracking, it gives you the option to use the loan for any kind of expense.
Type of secured loan: You are not required to submit to the lender any other security / collateral other than the pledged gold ornaments.
Lower interest rate: Interest rates on gold loans are lower than personal loans because gold serves as collateral.
Liquidate inactive assets: Active inactive, gold is rarely used to generate money. Therefore, gold loan is the perfect solution to raise capital and use the fund when you need the money to meet your financial needs. It is also safer in the lockers of a bank or financial institution than in your own home.