RBI pushes gold loans to 90% of their value amid Covid-19 crisis

In accordance with the latest guidelines, loans against gold have been increased to 90 percent, from 75 percent previously fixed, of the value of the precious metal.

Hindustan Times, New Delhi | By hindustantimes.com | Published by Sparshita Saxena

UPDATE AUG 06, 2020 13:11 IST

In his bimonthly monetary policy speech Thursday, Reserve Bank of India (RBI) Governor Shaktikanta Das announced a relaxation of guidelines on gold lending – a move that will allow lenders to grant more loans against jewelry . In accordance with the latest guidelines, loans against gold have been increased to 90 percent, from 75 percent previously fixed, of the value of the precious metal. The decision was taken in view of the Covid-19 and to mitigate its impact, the The governor of the RBI said.

Gold-backed loans are gaining traction and becoming increasingly popular with banks amid the Covid-19 crisis. The yellow metal has traditionally been viewed as a safer mode of investing and borrowing than other options.

Gold is often used as a safe store of value in times of political and financial uncertainty. Historically, amid economic turmoil, gold has generated positive returns when stocks face a recession.

Read also : Repo rate unchanged at 4%, outbreak of Covid-19 dampened early signs of recovery

After meeting its six-member Monetary Policy Committee (MPC), the RBI decided Thursday to leave repo and reverse repo rates unchanged. While the repo rate remains at four percent, the repo rate remains unchanged at 3.3 percent.

In an effort to stimulate the economy amid the pandemic, the MPC had cumulatively reduced the repo rate by 115 basis points previously in two meetings, resulting in a total cut in the policy rate of 250 basis points since. February 2019.

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