The Reserve Bank of India on October 6 doubled the ceiling for gold loans for urban cooperative banks (UCBs) under the bullet repayment scheme to Rs 4 lakh.

However, this is applicable only to banks that have met the overall target and sub-targets under the Priority Sector Lending (PSL) as on March 31, 2023,

The bullet repayment scheme lets borrowers repay both the principal and interest amounts on a loan as a lump sum when the loan tenure ends.

RBI first allowed bullet repayment of gold loans up to Rs 1 lakh in 2007. In 2014, the ceiling was doubled to Rs 2 lakhs while restricting the repayment period to 12 months.

UCBs have been seeking an increase in the loan ceiling to help small and marginal borrowers meet their funding requirements.

RBI recently extended the timeline for UCBs to achieve PSL targets by two years to March 31, 2026.

The average ticket size of gold loans for non-banking finance company Manappuram Finance is around Rs 85,847, while for Muthoot Finance it is around Rs 1,22,008.

RBI Governor Shaktikanta Das announced the increase in the loan ceiling after announcing the monetary policy. The six-member Monetary Policy Committee, Das said, unanimously agreed to keep the repo rate unchanged at 6.5%.

The MPC also decided by a 5:1 majority to remain focused on "withdrawal of accommodation," Das said.

(Edited by : Shweta Mungre)

First Published:Oct 6, 2023 10:55 AM IST