Reserve Bank of India raised the ceiling of gold loans given by regional rural banks (RRB)

RBI allows regional rural banks to grant gold loans up to Rs2 lakh

Question: Recently Reserve Bank of India has raised the ceiling of gold loans given by regional rural banks (RRB) to-
(a) 1 Lakhs
(b) 2 Lakhs
(c) 2.50 Lakhs
(d) 3 Lakhs
Ans: (b)
Related facts:

  • On 16 February 2017; Reserve Bank of India has raised the ceiling of gold loans given by regional rural banks (RRB).
  • It has been increased to Rs 2 lakh from Rs 1 lakh, expanding the access to credit for farmers and artisans willing to pledge gold as collateral.
  • RBI has doubled the gold loan ceiling for loans not exceeding 12 months from the date of sanction.
  • Interest will be charged to the account at monthly rests but will become due for payment along with principal only at the end of 12 months from the date of sanction.
  • For this RRBs should maintain a Loan to Value (LTV) ratio of 75% on the outstanding amount of loan including the interest on an ongoing basis, failing which the loan will be treated as a Non Performing Asset (NPA).
  • RBI has clarified that crop loans sanctioned against the collateral security of gold/gold ornaments shall continue to be governed by the extant income recognition, asset classification and provisioning norms for such loans.
  • India’s first RRB was established in 1975.
  • These were set up on the recommendations of The M. Narasimham committee.

Reference:
https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10861&Mode=0
http://economictimes.indiatimes.com/industry/banking/finance/banking/regional-rural-banks-can-offer-gold-loans-up-to-rs-2-lakh/articleshow/57188429.cms