New Delhi, Jan 9 (KNN) The Reserve Bank of India (RBI) has allowed Non-Banking Financial Companies (NBFCs) to lend up to 75 per cent of the value of gold jewellery given as security from 60 per cent at present.

“In view of the moderation in the growth of gold loan portfolios of NBFCs in the recent past, and also taking into consideration the experience so far, it has been decided to raise the Loan-To-Value (LTV) ratio to upto 75 per cent for loans against the collateral of gold jewellery from the present limit of 60 per cent with immediate effect,” said an official notification.

It said the value of the jewellery for the purpose of determining the maximum permissible loan amount will be only the intrinsic value of the gold content therein and no other cost elements should be added there to.

On standardisation of value of gold in arriving at LTV ratio, it said NBFCs have raised apprehensions on certifying the purity of the gold jewellery accepted as collateral on grounds that under the current practices it was possible only to arrive at the proximate purity of the gold and that such a certification could lead to dispute with the borrowers.

The top bank also clarified that certified purity would be applied for determining the maximum permissible loan and the reserve price for auction.

The KUB Rao Working Group had recommended that the LTV ratio may be increased from 60 per cent to 75 per cent once the business levels of the gold loan NBFCs come to a level considered appropriate. The Working Group had also recommended standardisation of the methodology of determining the value of gold. (KNN Bureau)