The Reserve Bank of India has relaxed the Rs 1-lakh ceiling on loans for nonagricultural purposes against pledged gold and has left it to individual banks to decide on a lending cap.
"Banks, as per their board-approved policy, may decide upon the ceiling with regard to the quantum of loans that may be granted against the pledge of gold jewellery and ornaments for nonagricultural end uses," RBI said in a circular, responding to representations from them. RBI retained the loan-tovalue ratio at 75% of the value of gold and the tenor of the loan to one year.
RBI had limited lending against pledged gold to Rs 1 lakh in December 2013 and a month later, capped the loan-to-value ratio at 75%. RBI clarified that interest will be charged to the account at monthly rests and may be recognised on accrual basis provided the account is classified as a 'standard' account. This will also apply to existing loans, it said.
The move may help commercial banks increase their retail secured lending portfolio. Many large commercial banks, including leading public sector lenders, had actively used this channel, popularised by a few south-based nonbanking finance companies. However, with the increased volatility in gold prices and the clampdown on gold imports by hiking duty, RBI intervened and restricted such lending by banks.
For the valuation of gold, banks may use the historical spot gold price data publicly disseminated by a commodity exchange regulated by the Forward Markets Commission consistently, as per their board-approved policy, in addition to prices issued by the India Bullion and Jewellers Association.
Source : http://articles.economictimes.indiatimes.com/
"Banks, as per their board-approved policy, may decide upon the ceiling with regard to the quantum of loans that may be granted against the pledge of gold jewellery and ornaments for nonagricultural end uses," RBI said in a circular, responding to representations from them. RBI retained the loan-tovalue ratio at 75% of the value of gold and the tenor of the loan to one year.
RBI had limited lending against pledged gold to Rs 1 lakh in December 2013 and a month later, capped the loan-to-value ratio at 75%. RBI clarified that interest will be charged to the account at monthly rests and may be recognised on accrual basis provided the account is classified as a 'standard' account. This will also apply to existing loans, it said.
The move may help commercial banks increase their retail secured lending portfolio. Many large commercial banks, including leading public sector lenders, had actively used this channel, popularised by a few south-based nonbanking finance companies. However, with the increased volatility in gold prices and the clampdown on gold imports by hiking duty, RBI intervened and restricted such lending by banks.
For the valuation of gold, banks may use the historical spot gold price data publicly disseminated by a commodity exchange regulated by the Forward Markets Commission consistently, as per their board-approved policy, in addition to prices issued by the India Bullion and Jewellers Association.
Source : http://articles.economictimes.indiatimes.com/
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