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Gold Loan: The Reserve Bank has advised banks to be cautious while giving gold loans. After this, banks and NBFCs have now started taking strict action in giving gold loans.
New Delhi. After the Reserve Bank of India (RBI) expressed concern over the increasing volatility in gold prices, banks and non-banking financial companies (NBFCs) have started tightening the rules for giving gold loans. Financial institutions have reduced the Loan-to-Value (LTV) ratio for gold loans. Earlier, loans were given up to 70-72% of the total value of gold, now it has been reduced to 60-65%. This simply means that now customers will get less money for the same amount of gold than before.
The main concern of the Reserve Bank is the sharp movement in gold prices due to global uncertainty and currency fluctuations. Due to prices reaching record levels, borrowers are withdrawing more money. The regulator fears that if gold prices fall even by 10-15% in the future, the value of the pledged jewelery may be less than the outstanding loan amount, increasing the risk of default.
Lessons from past crises
Learning from earlier crises in the microfinance and personal loan sectors, banks and NBFCs are now giving priority to ‘stability’ rather than ‘aggressive growth’. Credit norms are being tightened to reduce repayment stress and pressure on asset quality so that any kind of systemic weakness can be avoided.
Record jump in gold prices
Currently, gold on MCX Spot is at the level of around ₹ 1.31 lakh per 10 grams. In the last six months, a tremendous increase of about 35% has been seen in the prices. Due to this boom, there has been an unprecedented surge in the demand for gold loans. According to statistics, since March 2025, there has been an increase of almost 100% year-on-year in loans given against jewellery.
