The Reserve Bank of India (RBI) has announced significant changes to the gold loan regulations, increasing the loan-to-value (LTV) ratio for smaller loans. For gold loans up to ₹2.5 lakh, the LTV ratio has been raised from 75% to 85%. This means borrowers can now avail a loan of up to ₹85,000 against gold worth ₹1 lakh, compared to the earlier limit of ₹75,000.
Additionally, gold loans up to ₹2.5 lakh will no longer require a credit appraisal, simplifying the loan process with reduced paperwork and faster disbursal. This move is expected to benefit small borrowers, particularly in rural and semi-urban areas, by improving access to credit.
For gold loans between ₹2.5 lakh and ₹5 lakh, the LTV ratio has been set at 80%. Loans above ₹5 lakh will continue to have a maximum LTV of 75%. Credit appraisal will remain mandatory for loans exceeding ₹2.5 lakh.
Following this announcement, shares of gold loan companies have seen a notable uptick, reflecting investor optimism about increased demand in the segment.