In a major relief for small borrowers and households in urgent need of funds, the Reserve Bank of India (RBI) has increased the Loan-to-Value (LTV) ratio for gold loans up to ₹2.5 lakh from 75% to 85%. The move, announced by RBI Governor Sanjay Malhotra during a post-MPC press briefing on Friday, will allow borrowers to receive a higher loan amount for the same quantity of pledged gold.
More Money Against the Same Gold
With this decision, individuals pledging gold worth ₹1 lakh will now be eligible to borrow up to ₹85,000—an increase from the earlier ₹75,000 cap. The revised guidelines will be officially notified either by Friday evening or Monday, Malhotra said.
The increased LTV ratio comes in response to suggestions from the Ministry of Finance, which had recommended that the RBI reconsider its draft rules for small-ticket gold loans to avoid undue hardship for middle-income borrowers and small business owners.
Credit Assessment Waiver for Small Loans
In a further relaxation, the RBI is also removing credit evaluation requirements for small-ticket gold loans, simplifying the borrowing process for individuals seeking limited funds. This will significantly ease access to credit for those in urgent need of liquidity—especially in rural areas or among informal workers.
Finance Ministry’s Intervention
The RBI’s decision follows feedback from the Department of Financial Services (DFS) under the guidance of Finance Minister Nirmala Sitharaman. The DFS urged the RBI to exclude borrowers taking loans up to ₹2 lakh from its draft guidelines, suggesting such rules could negatively impact a vulnerable borrower base.
According to an official note dated May 30, the RBI is actively reviewing public comments and stakeholder concerns. The final guidelines are expected to reflect a balanced approach that ensures both consumer protection and accessibility.
