New Delhi, August 6: If you are planning to apply for a gold loan, this could be the best time for it. The Reserve Bank of India (RBI) has increased the loan-to-value (LTV) ratio for gold from 75 percent to 90 percent in a bid to mitigate the impact of COVID-19 on households. The LTV ratio indicates that the proportion of the collateral’s value that a lender can finance through the loan. The increased LTV will be available on loans availed of till 31 March 2021. India's Real GDP Growth For FY20-21 Estimated to be Negative, Says Shaktikanta Das in RBI Monetary Policy.
"With a view to mitigating the impact of COVID-19 on households, it has been decided to increase the permissible loan-to-value ratio (LTV) for such loans to 90 per cent. This relaxation shall be available till March 31, 2021," RBI Governor Shaktikanta Das said. Till today, banks could lend money worth up to 75 percent of the value of gold jewellery and ornaments as loans. Now, they can lend up to 90 percent. RBI Monetary Policy: Repo Rate Unchanged at 4%, Reverse Repo Remains Unchanged at 3.3%.
For example, if you seek the loan on gold worth Rs 100, you could earlier get Rs 75, now you can get a loan amount of Rs 90, an increase of 20 percent. The RBI's decision came amid rising demand for gold loans, especially after the coronavirus (COVID-19) outbreak.
How Will Increased LTV on Gold Loans Benefit Borrowers?
As mentioned above, borrowers will get 20 percent extra loan amount following the raise in LTV ration for gold loans. Moreover, the prices of gold are also rising. Hence, borrowers can avail higher loan against the same quantity of gold. Gold prices have surged over 30% since April this year.
What if You Have Already Taken Gold Loan?
The relaxed LTV ratio for gold loans will be applicable for new loans. However, existing borrowers can reach out to the lender, prepay their loans and avail again under the increased LTV ratio. Generally, gold-loans don't have any prepayment charges so you prepay the borrowed amount to clear the existing loan. And apply for a fresh loan on the gold you possess under the relaxed norms.