RBI to raise gold loan-to-value ratio to 85 per cent for small borrowers of up to Rs 2.5 lakh

The increase in the loan-to-value ratio for small loans means that if the gold pledged is worth Rs one lakh, borrowers can get up to Rs 85,000 as a loan, up from Rs 75,000

Mumbai: Reserve Bank Governor Sanjay Malhotra on Friday said the central bank will raise the Loan-to-Value (LTV) ratio for gold loans to small borrowers of up to Rs 2.5 lakh to 85 per cent from the existing 75 per cent.

Speaking at a press conference after the monetary policy meeting, he said the final regulations on gold loans will be announced today or latest by Monday.

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The increase in the loan-to-value ratio for small loans means that if the gold pledged is worth Rs one lakh, borrowers can get up to Rs 85,000 as a loan, up from Rs 75,000.

The move is expected to make it easier for households and small businesses to access funds. Malhotra also said that credit appraisal requirements will be removed for small-ticket loans, to make things easier for borrowers.

Additionally, end-use monitoring will only be mandated if the loan qualifies under the Priority Sector Lending (PSL) norms. The easing of norms comes in the backdrop of the Finance Ministry’s suggestion last week that the Reserve Bank should exclude small borrowers of up to Rs 2 lakh from the provisions of its draft directions on lending against gold collateral. The Finance Ministry has also suggested that the implementation of the guidelines be postponed to next year.

“The draft directions on lending against gold collateral issued by the RBI have been examined by the Department of Financial Services (DFS) under the guidance of Finance Minister Nirmala Sitharaman. The DFS has given suggestions to the RBI to ensure that the requirements of the small gold loan borrowers are not adversely affected,” the Finance Ministry had said.

DFS has also stated that such guidelines will need time to implement at the field level and hence may be suitable for implementation from 1st January 2026 only, the statement said.

Further, DFS has suggested that small ticket borrowers below Rs 2 lakh may be excluded from the requirements of these proposed directions to ensure timely and speedy disbursement of loans for such small ticket borrowers, the statement explained.

“RBI is reviewing the feedback received on the Draft guidelines. It is expected that concerns raised by various stakeholders, as well as the feedback received from the public, will be duly considered by the RBI before finalising the directions on the same. The suggestions have been duly forwarded to the RBI, the statement, issued on May 30, added.