Mumbai, October 6: The Reserve Bank of India (RBI) made an important announcement on Friday, raising the monetary ceiling for gold loans granted under the bullet repayment scheme.
The ceiling has been increased from Rs 2 lakhs to Rs 4 lakhs for urban co-operative banks (UCBs) that have met the overall Priority Sector Lending (PSL) target and sub-targets as of March 31, 2023.
The RBI stated that these banks must continue to meet the PSL targets and sub-targets in the future, with detailed guidelines to be issued separately.
This move by the central bank is aimed at incentivizing UCBs that have successfully met the prescribed PSL targets as of March 31, 2023. UCBs have been granted an extended glide path to achieve their PSL targets beyond March 2023, and this new incentive is expected to expedite the process.
UCBs had sought an increase in the ceiling on loans against gold and gold jewelry from Rs 2 lakhs to Rs 5 lakhs under the bullet payment scheme, primarily to address the funding requirements of small and marginal borrowers.
The RBI originally permitted bullet repayment of gold loans up to Rs 1 lakh in 2007, which was later raised to Rs 2 lakhs in 2014, with a repayment period restricted to 12 months. With this recent development, the scheme has been further liberalized.
