Key Highlight for common man from RBI Meet

Now get more debt on your gold

With the Covid crisis, there is a shortage of cash in the hands of the people. Even if we want to take loans due to declining income .. No financial institution is coming forward. For those who need money in emergencies, the only way out now is to pawn gold. Until now, banks have lent up to 75 per cent of the value of gold. This value is usually determined by banks once a month or two to three times a month. Now the RBI has increased the loan-to-value (LTV) on gold to 90 per cent. It applies to non-agricultural loans up to March 31, 2021. That is .. up to now a loan of Rs 75,000 was available on gold worth Rs 1 lakh. With the latest decision of the RBI, it is possible to borrow up to Rs 90,000

Very sour for traders


Those who run businesses are plagued by a shortage of capital. Micro, Small and Medium Enterprises- Those who run their own businesses need immediate cash availability. Raising the limit on gold mortgage loans is a common factor for them. The interest rate on these is low compared to personal loans. RBI's latest decision is a positive development for traders - small borrowers, those with low credit scores and those with some income uncertainty.

For new loans only ..

It remains to be seen whether banks will lend up to 90 per cent of the value of gold. This also applies to new loans. Those who have already taken loans on gold collateral .. If they want to get a higher amount, they have to pay off the old loans and take a new loan. These are loans that have nothing to do with maturity. Therefore, there are no fees like prepayment. Without repaying the old loan .. Some banks may give a top loan on the same loan.

Will NPAs increase

Banking experts believe that the latest decision poses some risk to banks and non-bank financial institutions that provide cash loans. Currently the Gold price is at its maximum levels. If the value goes down from here, will the borrowers pay off the debt? Is an argument that is doubtful. If the loan is not repaid .. the banks can sell the gold but, first they have to declare the loan as NPAs. Even if the balance is not met .. Banks will have the flexibility to sell gold easily. According to a banking expert, this would be a bit of a hassle for banks and financial institutions if the balance could not be legally collected from the borrower.