RBI MPC Meeting October 2023: Gold loan limit enhanced for urban cooperative banks

Fri Oct 06 2023

The Reserve Bank of India, on the sidelines of the MPC outcome today, announced an increase in the gold loan limit for urban cooperative banks (UCBs). The limit on loans against gold and gold jewellery now stands at Rs 4 lakh, up from the earlier Rs 2 lakh. The ceiling on the gold loan limit has been increased to incentivise UCBs to meet their prescribed priority sector lending (PSL) targets as of March 31, 2023.

“It has been decided to increase the existing limit for Gold Loans under the Bullet Repayment scheme from Rs 2 lakh to Rs 4 lakh in respect of Urban Co-operative Banks (UCBs) who have met the overall target and sub-targets under the Priority Sector Lending (PSL) as of March 31, 2023. This measure is in pursuance of our earlier announcement that suitable incentives shall be provided to UCBs that have met the prescribed PSL targets as of March 31, 2023,” read Shaktikanta Das’ statement.

Earlier, as part of the bullet payment scheme, urban cooperative banks in the country sought an increase in the gold loan limit from Rs 2 lakh to Rs 5 lakh to meet the financing needs of small borrowers.

UCBs are allowed to offer gold loans under the bullet repayment as well as equated monthly installment repayment modes for 12 months. Initially, the limit for the loan amount was Rs 1 lakh, which was pushed later to Rs 2 lakh in 2014.

Bullet repayment is a repayment method whereby the principal, as well as the interest on the borrowed sum, are repaid as a lump sum at the end of the loan term.

Source: https://www.zeebiz.com