The Reserve Bank of India (RBI) has announced a major change in the rules for gold loans, offering much-needed relief and opportunity to borrowers. The new rule will especially benefit individuals looking to take small loans against their gold.
Loan-to-Value Ratio Increased
According to the latest update, the Loan-to-Value (LTV) ratio has been increased from 75% to 85%. This means borrowers can now get a higher loan amount for the same value of gold. For example, if your gold is worth ₹1 lakh, earlier you could get a loan of up to ₹75,000. Now, you can get up to ₹85,000.
This change will apply to gold loans up to ₹2.5 lakh, making it ideal for people with small borrowing needs, especially in rural and semi-urban areas.
A Big Boost for Small Borrowers
This decision is expected to make gold loans more accessible and useful for individuals in smaller towns and villages. People often pledge their gold for emergency funds, household needs, or small business purposes. With this new rule, they will now receive a higher loan amount without extra hassle.
What Is a Gold Loan and How Does It Work?
A gold loan is a type of secured loan where borrowers pledge their gold ornaments or coins to a bank or lender and get a loan in return. One of the key benefits is that it does not require much paperwork or heavy documentation. Your gold itself acts as the collateral.
Under the new RBI guidelines, the loan process becomes even more relaxed. Even if you don’t have a gold purchase bill, you can still get a loan by simply submitting a self-declaration.
Why Is This Change Important?
This rule change is crucial for those who own gold but have limited income or assets. Earlier, many people were not eligible for higher loans due to the 75% limit. With the new 85% LTV limit, more people can now make better use of their gold assets in times of financial need.
It especially helps people who may have only small quantities of gold but require more money for emergencies like education, medical bills, or short-term business investments.
What’s Next from RBI?
The RBI has issued this guideline in the form of a draft, meaning it is open for feedback from various stakeholders. After considering suggestions, the final version will be released. RBI has also clarified that this is not a brand-new policy but a consolidation and update of existing rules to make the gold loan process smoother.
Final Thoughts
This update from RBI is a positive step toward making credit more accessible to the common man. If you’re planning to apply for a gold loan, this is a great opportunity to get the funds you need more easily and with better value against your gold. The new policy could be a game-changer for many households and small businesses that depend on gold-backed credit.
