Loan against Only Gold can not be more then 60 percent of Value

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RBI/2011-12/467
DNBS.CC.PD.No.265/03.10.01/2011-12

Lending Against Security of Single Product – Gold Jewellery

It is observed that NBFCs that are predominantly engaged in lending against the collateral of gold jewellery have recorded significant growth in recent years both in terms of size of their balance sheet and physical presence. This in turn, has led to their increased dependence on public funds including bank finance and non-convertible debentures issued to retail investors.

2. Given the rapid pace of their business growth and the nature of their business model, which has inherent concentration risk and is exposed to adverse movement of gold prices, as a prudential measure, it has been decided that all NBFCs shall

i. hereafter maintain a Loan-to-Value(LTV) ratio not exceeding 60 percent for loans granted against the collateral of gold jewellery and
ii. disclose in their balance sheet the percentage of such loans to their total assets.

3. NBFCs primarily engaged in lending against gold jewellery (such loans comprising 50 percent or more of their financial assets) shall maintain a minimum Tier l capital of 12 percent by April 01, 2014.

4. NBFCs should not grant any advance against bullion / primary gold and gold coins.