RBI has left it to bank boards to decide on the quantum of loans against pledge of gold jewellery and capped the tenure at 12 months.
Mayur Shetty, TNN | Jul 22, 2014, 05.56PM IST | Times of India

MUMBAI: Reserve Bank of India has removed the Rs 1 lakh ceiling on loan against jewellery where the borrower repays all dues in one go on maturity of the loan.

The central bank has now left it to bank boards to decide on the quantum of loans against pledge of gold jewellery for non-agricultural use and capped the tenure at 12 months.

Last December, RBI had permitted banks to provide loans against gold and jewellery with a bullet repayment (total dues on maturity) subject to the loan amount being within Rs 1 lakh. In a subsequent circular it prescribes a Loan to Value (LTV) ratio of not exceeding 75% for banks’ lending against gold jewellery including bullet repayment loans. This meant that the total dues at any point could not be more than 75% of the value of gold.

In a circular issued to all banks on Tuesday, RBI said, “We have received representations from banks requesting to increase the prescribed ceiling and to review other conditions applicable for non-agricultural loans against pledge of gold ornaments and jewellery, where both interest and principal are payable at maturity of the loan.”

“In this connection, it is also clarified that LTV of 75% shall be maintained throughout the tenure of the loan for all loans extended against pledge of gold ornaments and jewellery for non-agricultural end uses. The LTV ratio shall be computed against the total outstanding in the account, including accrued interest, and current value of gold jewellery accepted as security/collateral,” it added.

Source : http://goo.gl/en5L3m