In order to provide some relief to borrowers in the midst of the epidemic, the Reserve Bank of India announced in its August monetary policy review meeting that those who have taken personal loans but repay them on time since March 31, 2020 Are unable to, then they have a chance to get it restructured. After this people were offered the opportunity to borrow more money on gold loans.
Significantly, during the lockdown, there was a bump in gold prices and RBI also increased the LTV (loan to value ratio) to 90 percent. Earlier, on gold worth Rs 1 lakh, loans between 60,000 and 75,000 were available, while now loans up to Rs 90,000 are available.
Loan can be taken up to 90 percent of the price of gold jewelery
The Reserve Bank of India had announced that lending institutions such as banks and non-banking financial institutions (NBFCs) could offer loans up to 90 percent of the value of gold jewelery. This is much higher than the earlier 75 percent. The RBI had said, "As per the extant guidelines, loans sanctioned by banks for pledging gold jewelery and jewelery for non-agricultural purposes should not exceed 75 per cent of the value of gold jewelery and jewelery." Considering the economic impact of the Carona virus epidemic on families, traders and small traders, it has been decided that the loan to value ratio for loans on gold jewelery for non-agricultural purposes will increase from 75 per cent to 90 per cent. '
According to RBI, this relief in LTV (LTV) will be valid only till March 31, 2021. Given that the higher LTV is due by 31 March next year, the risk on the portfolio is for a limited period.
Gold Price Breakdown
This announcement by RBI has made gold loans more attractive. However, gold prices have fallen in the last two months. Gold prices on MCX fell from their highest level of Rs 56,300 per 10 grams to Rs 51,000 per 10 grams.
The fall in gold prices reduces the loan amount that a person can borrow. For existing gold loan borrowers who took loans at a time when gold was at a higher level, this is a concern, as banks may ask them to make a partial payment if prices went beyond the current level. Experts say that this can lead to unnecessary disputes and pressure on the borrower to follow the system of extra margin.
Are you thinking of taking a gold loan?
If you are thinking of taking a gold loan, then you must consider it once. For example, suppose you want to take a loan from a bank on 100 grams of gold jewelery. The bank charges Rs 4 lakh for this gold and gives you a loan of Rs 3.6 lakh as per 90 per cent LTV. Gold prices then fall to the level of 47,000. In such a situation, your bank may ask you to deposit an additional 10 grams of gold as margin or to repay a few thousand rupees out of the loan amount. Therefore, you should be prepared for this situation while taking a gold loan.