RBI has decided to increase the LTV ratio to 75% from the existing 60% on gold loans. This comes as a big relief to gold loan companies which were facing a dip in sales after RBI had set a cap on the loan limit upon the mortgage of gold to 60%.
The move is a result of the recommendations from KUB Rao working group. The group has said that LTV may be raised to 75% once the business levels of the gold loan companies come to a level considered appropriate. The group has also recommended standardization of the process for determining the value of gold.