Mumbai, Dec 31 (KNN) In response to suggestions from banks and with a view to ensuring a level playing field among various market participants, the Reserve Bank of India (RBI) has allowed the banks to sanction the loans of up to Rs 1 lakh against pledge of gold ornaments and jewellery for other than agricultural purposes.
 
“…it has been decided to permit bullet repayment of loans extended against pledge of gold ornaments and jewellery for other than agricultural purposes subject to the amount of loan sanctioned should not exceed Rs 1.00 lakh at any point of time,” RBI said in a notification.
 
Bullet repayment is a lump sum payment for the entire loan amount paid at maturity. 
 
Such bullet repayment was not allowed so far on loans taken by pledging gold for non-agriculture purpose.
 
The apex bank further added that the period of the loan shall not exceed 12 months from the date of sanction.
 
Interests on such loans will be charged at monthly rates, but will become due, along with the principal, only at the time of maturity.
 
“Banks should prescribe a minimum margin to be maintained in case of such loans and accordingly fix the loan limit taking into account the market value of the security (gold ornaments), expected price fluctuations, interest that will accrue during the tenure of the loan, etc.,” the notification added.
 
The notification further said that the account would be classified as non-performing asset (sub-standard category) even before the due date of repayment, if the prescribed margin is not maintained. (KNN Bureau)