Complaint against banks for violation of rules in providing gold jewelery loans

The 'Association of Gold Credit Institutions' has asked the RBI to take action against banks that offer loans against gold jewellery, alleging they are violating the rules.

Gold loan

RBI's ratio of how much to lend against a property's value is called LTV.

Considering the hardship of the people during the Corona period and to help them, the RBI has increased the LTV against gold jewelery pawned for non-agricultural purposes from 75 per cent to 90 per cent.

It also said that this offer will be valid from August 2020 to March 31, 2021 only.

In this case, till now many banks have been providing loans against gold ornaments and jewelery on the same rate basis, according to the Gold Loan Companies Association.

In this regard, the association has informed as follows:

As some public sector and private banks continue to violate the rules of LTV, we have complained to the Reserve Bank.

Loan value

 As of March 2022, the total outstanding gold loans of banks and non-banking financial institutions stood at Rs 5.09 lakh crore. Of this, the share of banks is 78 percent, while the share of other financial institutions is 22 percent.

A common rule for all banks and non-banking financial institutions is that 75 percent of the loan should be against the asset value.

Even after the relaxation of rules during the Corona period, many banks continue to give loans at 80 to 90 percent.  This has been reported.