In its directive dated 20th January 2014 the RBI has directed banks that ,
As a prudential measure, it has been decided to prescribe a Loan to Value (LTV)
Ratio of not exceeding 75 per cent for banks’ lending against Gold jewellery
(including bullet repayment loans against pledge of gold jewellery). Therefore,
henceforth loans sanctioned by banks should not exceed 75 per cent of the value
of gold ornaments and jewellery.
In order to standardize the valuation and make it more transparent to the
borrower, it has been decided that gold jewellery accepted as
security/collateral will have to be valued at the average of the closing price
of 22 carat gold for the preceding 30 days as quoted by the India Bullion and
Jewellers Association Ltd. [Formerly known as the Bombay Bullion Association
Ltd. (BBA)]. If the gold is of purity less than 22 carats, the bank should
translate the collateral into 22 carat and value the exact grams of the
collateral. In other words, jewellery of lower purity of gold shall be valued
proportionately.
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