Gold jewellery won't get you loans beyond 60% of value

MUMBAI: Concerned over the fast paced growth of gold loans in the country, the Reserve Bank of India has yet again come out with curbs on the business. The new norms restrict loans to 60% of the jewellery value and bar loans against coins and gold biscuits.

The central bank has said that finance companies that specialize in lending against gold will need to have a net worth that is at least 12% of their loans exposed to risk. Lenders said that the concerns were unfounded and would risk driving small borrowers back to unregulated moneylenders. Earlier, RBI had withdrawn the priority sector status to gold loan finance companies-a status which had encouraged banks to lend them money.

Some see this as a move to discourage investment in gold, which is turning to be a drain on foreign exchange resources. RBI's measures comes a week after FM doubled import duty on gold. However, lenders deny that restrictions on lending would impact demand.