RBI To Revise LTV For Small-Ticket Gold Loans To 85 Pc

The draft regulations by RBI had earlier proposed to cap the LTV at 75 per cent uniformly for all loans across banks and NBFCs. RBI’s revised guidelines have set the maximum LTV limit for loans below Rs 2. 5 lakh at 85 per cent and those between Rs 2.5 and Rs 5 lakh to 80 per cent. Small borrowers will receive 10 per cent more funds for the same collateral with this relaxation of the draft guidelines. The RBI had received suggestions from different stakeholders seeking relaxation of the norms.

The Finance Ministry also had suggested that small ticket borrowers below Rs 2 lakh may be excluded from the requirements of these proposed directions to ensure timely and speedy disbursement of loans.

Further, RBI gave the lenders the freedom to decide on small-ticket loan disbursals. As required in terms of the extant guidelines, a lender may decide on a suitable approach for lending against eligible collateral as part of its credit risk management framework, consistent, inter alia, with the principle of proportionality and ease of access for small ticket loans. However, detailed credit assessment, including assessment of borrower’s repayment capacity shall be undertaken in case the total loan amount against eligible collateral is above Rs 2.5 lakh to a borrower, it said.

RBI also has revised the aggregate weight of ornaments pledged for all loans to a borrower. It shall not exceed 1 kg for gold ornaments, and 10 kilograms for silver ornaments. The aggregate weight of coins pledged for all loans to a borrower shall not exceed 50 gms in case of gold coins, and 500 gms in case of silver coins.

In the case of auctions, A lender shall declare a reserve price for the gold and silver collateral at the time of auction, which shall not be less than 90 per cent of its current value. Provided that in case auctions fail twice, a reserve price not less than 85 per cent of its current value shall be adopted.