Major gems & jewellery stocks trade in green as RBI hikes LTV ratio for loans to 90%

Fresh gold loans sanctioned on and after April 1, 2021, will continue to attract an LTV ratio of 75%.

Aug 06, 2020 02:08 IST India Infoline News Service

On Thursday, the RBI announced good news for borrowers by hiking the loan-to-value (LTV) ratio against gold and jewellery. Such even led to positive performance in major gems & jewellery stocks on exchanges.

At around 1.26 PM, Titan stock was trading at Rs1,115.05 per piece up 0.86%, while Rajesh Exports at Rs480 per piece up 2.13%, Thangamayil Jewellery at Rs337.85 per piece higher by 0.13% and TBZ at Rs34.10 per piece up 1.49% on BSE.

RBI said, "With a view to further mitigate the economic impact of the COVID-19 pandemic on households, entrepreneurs and small businesses, it has been decided to increase the permissible loan to value ratio (LTV) for loans against pledge of gold ornaments and jewellery for non-agricultural purposes from 75% to 90%."

Earlier, the loans sanctioned by banks against pledge of gold ornaments and jewellery for non-agricultural purposes was up to 75% of the value of gold ornaments and jewellery.

LTV against gold and jewellery basically means that a lender will sanction you an amount of loan against gold as collateral. For borrowers, 90% LTV now means that he or she can avail higher amount against the commodities. These are also secured form loans as gold and jewellery are pledged as a guarantee.

Further, RBI said, "This enhanced LTV ratio will be applicable up to March 31, 2021, to enable the borrowers to tide over their temporary liquidity mismatches on account of COVID-19."

Thereby, fresh gold loans sanctioned on and after April 1, 2021, will continue to attract an LTV ratio of 75%.

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