RRBs can now extend loan up to Rs 2 lakh against gold

Mumbai: The Reserve Bank has doubled the quantum of loan against gold that could be granted by Regional Rural Banks (RRBs) to Rs 2 lakh, provided the repayment period does not exceed 12 months.

Earlier, the RRBs were permitted to grant gold loans up to Rs 1 lakh with bullet repayment option.

"On a review, it has been decided to increase the quantum of loan that could be granted under the scheme, from Rs 1 lakh to Rs 2 lakh...," the RBI said in a notification.

However, the RBI has imposed certain conditions for enhanced loan amount against gold.

"The period of the loan shall not exceed 12 months from the date of sanction. (And) Interest will be charged to the account at monthly rests but will become due for payment along with principal only at the end of 12 months from the date of sanction," it said.

Further, RRBs will have to maintain a Loan to Value (LTV) ratio of 75 percent on the outstanding amount of loan including the interest on an ongoing basis, failing which the loan will be treated as a Non Performing Asset (NPA).

The RBI also clarified that crop loans sanctioned against the collateral security of gold/gold ornaments will continue to be governed by the extant income recognition, asset classification and provisioning norms for such loans.