EXCLUSIVE! Relief for gold loan companies likely coming! LTV ratio may rise from 75 pct to 85 pct

The Reserve Bank of India (RBI) is mulling an increase in the Liquid to Value (LTV) ratio from 75 per cent 85 per cent and the apex bank may announce the decision in a few days, according to sources. As per the exclusive report by Zee Business TV, in case the LTV in the gold loan is increased, borrowers will be able to get up to 85 per cent of the liquid value of their mortgaged yellow metal. The report went on to add that if RBI makes any such announcement, it will be a big boost for NBFCs like Muthoot Finance and Manappuram Finance.

Elaborating upon the exclusive report, Zee Business TV reported, "The RBI is mulling to increase LTV ratio on gold loan from existing 75 per cent to 85 per cent. This means a gold loan borrower will be able to get 85 per cent of the liquid value of its mortgaged gold instead of existing 75 per cent. if this happens then it will be a big boost for the gold loan borrowers facing financial crisis during the COVID-19 lockdown. This rise in LTV ratio on gold loan will also help them  maximise their investment in gold."

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Analysing the impact of this LTV ratio, if the RBI does increase it, Zee Business Managing Editor Anil Singhvi said, "RBI is mulling to do this because in recent rimes, gold prices have gone up and liquidity in the market has shrunk. By increasing the LTV ratio on gold loans, RBI is trying to take advantage of the recent gold rally that we witnessed during the Coronavirus pandemic." 

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गोल्ड लोन देने वाली कंपनियों को बड़ी राहत, गोल्ड के बदले लोन रेश्यो 75% से बढ़ाकर 85% किया जाएगा; मोरेटोरियम पीरियड में ब्याज ना देने पर NPA नहीं माना जाएगा: सूत्र#ZBizExclusive @AnilSinghvi_ @SwatiKJain pic.twitter.com/LWNcOxBSGp

— Zee Business (@ZeeBusiness) May 27, 2020

Singhvi said that if the RBI takes this decision then it will be a boon for two NBFCs — Muthoot Finance and Manappuram Finance. He said that after the rise in LTV ratio in gold loan, Muthoot Finance income in the gold loan segment will increase by 21 per cent to 27 per cent while Manappuram Finance income will rise by 28 per cent to 30 per cent.