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The Reserve Bank of India (RBI) is the central authority that has the right to issue guidelines related to trading, loans and advances across the country. When it comes to gold loans, the RBI issues guidelines for lenders as well as borrowers to follow when lending or borrowing money in exchange for gold as collateral.In this blog, you will learn about the LTV (loan to value) ratio in gold loans, the maximum LTV under gold loans as per RBI directive and more.
Key Highlights:
- LTV ratio is the loan-to-value ratio which compares the value of the gold item kept as collateral to the amount of gold loan disbursed.
- The maximum LTV under a gold loan as per RBI directive cannot exceed 75 per cent.
- Gold loans with a higher LTV ratio are considered to be riskier and result in a higher gold loan interest rate.
LTV ratio is the loan-to-value ratio. It is a measure that compares the value of the gold item kept as collateral to the amount of gold loan disbursed. LTV is also used to assess the lending risk associated with gold loans and calculating it is crucial in the mortgage process.Gold loans with a higher LTV ratio are considered to be riskier and result in a higher gold loan interest rate. When a loan has a high LTV ratio, the lender is at a greater risk if the borrower defaults on repayments.
What is the Maximum LTV Under a Gold Loan as per the RBI Directive?
The maximum LTV under a gold loan as per RBI directive cannot exceed 75 per cent. This means that if the gold is valued at ₹100, the upper limit for the loan amount disbursed will be ₹75.How to calculate LTV for a gold loan? To calculate LTV for gold loan, you need to divide your loan amount by the market price of your gold item kept as collateral and multiply the result by 100. Also Read: Here's how you can buy gold digitally
FAQS - FREQUENTLY ASKED QUESTIONS
What is the maximum LTV under gold loan as per RBI directive? The maximum LTV
under gold loans as per RBI directive should be up to 75 per cent.
What does the latest RBI circular for gold loan say?
The latest gold loan RBI circular says that the maximum loan you can get against your pledged gold should be 75 per cent of its value.
What do you mean by RBI guidelines on gold loans by banks?
RBI guidelines on gold loans by banks are the rules issued by the RBI related to the issuance of gold loans by banks. RBI guidelines on gold loans by banks include factors such as loan tenure, interest rates, and purity of gold kept as collateral among others.
What are gold loan rules and regulations?
You can apply for a gold loan if you are an Indian citizen aged above 18. You also need to have gold items of a specific purity level to pledge as collateral if you want a gold loan.
How to calculate LTV for gold loan?
LTV = (Loan Amount/Market Value of Gold) * 100
What are RBI guidelines for gold loan recovery?
RBI guidelines for gold loan recovery say that banks should have a due diligence process in place for engaging with recovery agents, banks should give sufficient notice to borrowers before they take possession of their gold and provide them enough time to repay the loan before auctioning their gold items.
Can I request modification on the maximum LTV under gold loan as per RBI directive?
No, you cannot request changes in maximum LTV under gold loan as per RBI directive.
What are RBI LTV norms for home loan?
Current RBI LTV norms for home loan say that for properties below under ₹30 lakhs, LTV ratio should be up to 90 per cent and for properties between ₹30 lakhs and ₹75 lakhs, the LTV ratio should be up to 80 per cent.
Does maximum LTV under gold loan as per RBI directive keeps changing?
The maximum LTV under gold loan as per RBI directive does not keep changing. However, you should note that the RBI increased the LTV to 90 per cent from 75 per cent temporarily during the pandemic to help people who are facing financial crisis.
What are RBI gold loan rules?
RBI rules on gold loan require lenders to keep the maximum LTV ratio at 75 per cent while disbursing a gold loan and ensure that the pledged gold is of the claimed purity.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
