The Reserve Bank of India’s (RBI’s) determination to extend the loan-to-value (LTV) ceiling in its final directions on gold loans will help the expansion of non-banking monetary corporations (NBFCs) providing them, stated Crisil Ratings in a examine.
“The benefit will play out despite the change in LTV computation for bullet repayment loans, which now need to also factor in the accrued interest payable at the time of maturity, rather than just the initial disbursed principal amount. The increase in LTV ceiling will help offset this impact,” it stated.
The final directions issued lately suggest an LTV grid primarily based on ticket measurement and allow increased LTVs for lower-ticket consumption loans. The permitted enhance in LTV is highest for loans with ticket measurement of ₹2.5 lakh, with the restrict now at 85% vis-à-vis 75% earlier.
As per Crisil Ratings estimates, loans with a ticket measurement lower than ₹5 lakh comprise near 70% of the gold loan portfolio for NBFCs.
Malvika Bhotika, director, Crisil Ratings stated, “The revision in LTV norms for lower-ticket loans is expected to benefit gold loan focused NBFCs in two ways. First, it will provide a higher cushion to meet the LTV requirements even after factoring in accrued interest in bullet repayment loans. Second, this will provide additional headroom for lending. For bullet loans, the LTV at disbursement could increase somewhat from 65-68% currently to 70-75%.”
“That said, disbursement at higher LTVs will mean lower cushion to manage gold price fluctuations and will necessitate a sharper focus on risk management practices and timely auctions to manage ultimate losses,” she stated.
The directions are relevant from April 1, 2026, giving NBFCs the required time to re-orient their methods and processes to adjust to the revised laws.
While there might be some hiccups for sure gamers as they realign their operations, the laws will profit the sector, the ranking company stated.
Published – June 13, 2025 09:25 pm IST
