RBI Doubles Gold Loan Limit For UCB In Bullet Repayment Scheme
The Reserve Bank of India, in line with Priority Sector Lending criteria, has elevated the maximum threshold for gold loans within the Bullet Repayment Scheme from Rs 2 lakh to Rs 4 lakh for Urban Co-operative Banks. Initially, in 2007, the RBI authorised bullet repayment of gold loans up to Rs 1 lakh, which was subsequently augmented to Rs 2 lakh in 2014, with a repayment period capped at 12 months.
Urban Co-operative Banks have the prerogative to extend gold loans through both the Bullet Repayment and Equated Monthly Instalment (EMI) Repayment channels for a duration of 12 months. In the former, borrowers settle the principal and interest collectively in a lump sum to the lender at the end of the loan term. Conversely, in the EMI method, a fixed sum encompassing both principal and interest components is remitted by the borrower to the lender on a designated date each month.
Urban Co-operative Banks hold an advantageous position as their clientele primarily comprises middle-class and lower-middle-class individuals who are more inclined towards availing gold loans. Consequently, regulatory directives in this context should foster the expansion of this segment within Urban Co-operative Banks.
Colin Shah, Managing Director of Kama Jewelry, remarked, "The increase in the gold loan limit from Rs 2 lakh to Rs 4 lakh for urban cooperative banks will be advantageous for customers, especially during the upcoming wedding season."
