Your gold jewellery will now fetch loan up to 75%

Your gold jewellery will now fetch loan up to 75% of its value as against 60% earlier if you keep it as collateral for loan from non-banking financial companies (NBFCs).

The Reserve Bank of India (RBI) has allowed NBFCs to offer as loan as much as 75% of the value of the gold kept as collateral compared with 60% earlier. The decision came after moderation in the gold loan portfolios of NBFCs. The move is also aimed at monetising idle gold as far as possible through the organised sector.

The move is reversal of the central bank's earlier order in March 2012, when it asked NBFCs to reduce the loan-tovalue ratio from 75% to 60% on the back of rising exposure of NBFCs to gold loans, which posed a risk for their financial health in case of falling gold prices.

The RBI has also asked NBFCs to stop adding making charges to arrive at the value of gold jewellery. According to its recent notification, 'the value of the jewellery for the purpose of determining the maximum permissible loan amount will be only the intrinsic value of gold'.

It has also rejected the request of NBFCs not to make certifying the purity of gold mandatory. NBFCs has raised objection to giving in writing to borrower the purity and weight of gold as according to them given the current practices it was impossible to give the exact purity of gold and that could lead to dispute with borrowers.