The Reserve Bank of India on 8 January 2014 allowed the Non-Banking Financial Companies (NBFCs) to lend up to 75 percent of the value of gold. With this order of the central bank, the people seeking loan against gold can now borrow more.
Earlier, the limitation of loan on gold was 60 percent. The order has been passed in a view of the moderation in the growth of the gold loan portfolios of NBFCs in recent past. The value of loan will be the intrinsic value of the gold content and no other cost like making charges will be given.
The decision was taken following the recommendation of the KUB Rao Working group, which said that the loan-to-value (LTV) may be increased to 75 percent from 60 percent. The working group has also recommended the standardization methodology to determine the value of gold.
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