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💰 RBI Raises LTV Ratio on Gold Loans Below ₹2.5 Lakh to 85% in Pro-Credit Push
Mumbai | June 7, 2025 —
In a major relief for small borrowers, the Reserve Bank of India (RBI) has announced an increase in the loan-to-value (LTV) ratio on gold loans of up to ₹2.5 lakh from the existing 75% to 85%. The move is aimed at improving credit access for households, farmers, and small business owners who rely on gold as collateral.
This policy change was introduced as part of the RBI's ongoing efforts to enhance liquidity in the informal sector and address rising credit needs amid inflationary pressures.
📈 What Is the LTV Ratio and What Has Changed?
The Loan-to-Value (LTV) ratio determines how much loan a borrower can get against the value of their gold. With this revision:
Previous LTV limit: 75%
Revised LTV limit (for loans ≤ ₹2.5 lakh): 85%
This means if a person pledges gold worth ₹1 lakh, they can now borrow up to ₹85,000 instead of ₹75,000.
🧑🌾 Who Benefits From This Move?
The revised LTV ratio primarily benefits:
Low-income households
Small-scale farmers
Informal sector workers
Micro-entrepreneurs
Self-employed individuals
“By easing LTV norms for small-ticket gold loans, RBI is encouraging easier access to secured credit without compromising asset quality,” said a senior official from a leading cooperative bank.
🏦 Impact on Banks and NBFCs
Banks and NBFCs offering gold loans are expected to see an uptick in loan applications.
Risk remains manageable due to high liquidity of gold assets.
The move could also counter the rise in unsecured personal loans by offering a safer, collateral-backed alternative.
💡 Why Now?
This policy revision comes amid a broader focus on financial inclusion and providing flexible credit solutions during times of economic stress, particularly for rural and semi-urban populations where gold remains a key financial asset.
✅ FAQs: RBI’s Revised Gold Loan LTV Norms
Q1: What is the new LTV ratio on gold loans below ₹2.5 lakh?
A: The LTV ratio has been increased from 75% to 85% for gold loans up to ₹2.5 lakh.
Q2: Who can benefit from this change?
A: Small borrowers including households, farmers, small traders, and self-employed individuals.
Q3: Why did the RBI revise the LTV ratio?
A: To boost credit availability and support financial inclusion, especially for economically vulnerable sections.
Q4: Does this apply to all gold loans?
A: No, the revision only applies to gold loans with a value of ₹2.5 lakh or below.
Q5: Is this a temporary or permanent change?
A: As of now, it’s a policy revision with long-term intent, but the RBI may review it based on market response.
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Reported by Benny on June 8, 2025.