RBI has allowed the non-banking financial companies (NBFCs) to advance loans up to 75% of the value of gold jewellery used as collateral
The central bank (RBI) released a notification titled "Lending Against Security of Single
Product - Gold Jewellery" stating that the loan-to-value (LTV) ratio for
the NBFCs has been raised to 75% of the value of gold pledged as loan
from the earlier 60% with immediate effect.
The
lending limit has been hiked on par with the recommendations by the KUB
Rao Working Group formed by the RBI in 2012. It has suggested extension
of limit to facilitate monetisation of idle gold.
Only the
intrinsic value of the gold will be taken into account while calculating
the loan amount and no other costs such as making charges will be added
to it, RBI said.
Certification on purity of gold by NBFCs is
necessary to establish the maximum loan amount and the reserve price for
auction. However, the firms can include suitable caveats to safeguard
them from disputes on redemption, it said.
In
case, gold jewellery used as collateral weighs more than 20g,
verification of ownership is mandatory via a suitable document stating
the manner in which the ownership was established, the central bank
added.
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