RBI revises gold lending norms for NBFCs

Published: May 25, 2015 09:03

Save

The Reserve Bank of India (RBI) has announced revised set of guidelines for Non-Banking Financial Companies (NBFCs) for lending against gold.

Author: Paul Ploumis22 May 2015 Last updated at 08:11:05 GMT

NEW DELHI (Scrap Monster): The Reserve Bank of India (RBI) has announced revised set of guidelines for Non-Banking Financial Companies (NBFCs) for lending against gold. As per the new circular issued by the RBI, these institutions are allowed to use spot gold price at commodity exchanges regulated by Forward Markets Commission (FMC). NBFCs are allowed to use spot gold price in determining the value of the metal before advancing loan against it.

Until now, the valuation of gold was arrived at as the average of the closing price of 22-carat gold for the preceding 30 days as quoted by the Bombay Bullion Association (BBA). The spot gold price could be used as the base for calculating the loan-to-value (LTV)- the eligible loan amount for borrower against the gold collateral. Earlier in January 2014, the RBI had raised the LTV ratio up to 75% of the assessed value of security from 60%. Consequently, NBFCs are allowed to lend up to 75% of the assessed value of gold.

The country’s central bank has formulated several policies over the time, in an attempt to streamline NBFC’s mode of operation. It had earlier notified that NBFCs are allowed to consider only the intrinsic value of gold content for the purpose of determining the maximum permissible loan amount. No other cost elements could be added. Also, NBFCs are required to provide certificate of purity on received gold to the borrower. This purity certificate could be used as the base for determining the loan amount and auction price, in case the borrower defaults on making repayments.

A Non Banking Financial Company (NBFC) in India is a company registered under the Companies Act, 1956 of India, engaged in a variety of businesses such as loans and advances, acquisition of shares, stock, insurance business and chit business.

NBFCs perform functions similar to that of banks; however there are a few differences in that an NBFC cannot accept demand deposits; an NBFC is not a part of the payment and settlement system and as such, an NBFC cannot issue cheques drawn on itself; and deposit insurance facility of the Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors, unlike banks.

RBI India gold demand India gold import

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

For any inquiries or for more information, please contact: lemonzhao@smm.cn

For more information on how to access our research reports, please contact:service.en@smm.cn

Related News

1 hour ago

Data: SHFE, DCE market movement (Jul 14)

The following table shows the ferrous and nonferrous metals movement on the SHFE and DCE on 14 Jul , 2026

1 hour ago

2 hours ago

[Samsung Q2 Regains Top Spot in Global Smartphone Market]

Industry data released on Tuesday showed that Samsung Electronics regained the top spot in the global smartphone market in Q2, surpassing its US rival Apple. According to data from market research firm Counterpoint Research, Samsung accounted for a 24% share of global smartphone shipments from April to June, with Apple in second place at 20%. The firm’s earlier data showed that in Q1, Apple led the global smartphone market with a 21% share, ahead of Samsung’s 20%. Counterpoint attributed Samsung’s strong Q2 performance to the robust sales of the Galaxy S26-series, relatively mild price adjustments in key markets such as India and the Middle East, and aggressive sales promotions.

2 hours ago

[IDC: China's Smartphone Market Shipments Down 4.3% YoY in Q2 2026]

Preliminary data from IDC's Worldwide Quarterly Mobile Phone Tracker shows that China's smartphone market shipments in Q2 2026 were approximately 66.01 million units, down 4.3% YoY, marking five consecutive quarters of YoY decline. Since late March, Android producers have been forced to successively raise product selling prices or adjust configurations due to the continuous climb in the cost of core components such as storage, significantly dampening consumers' willingness to upgrade. Meanwhile, the boost effect of the national subsidy policy on demand has gradually weakened. As a result, during this year's "618" shopping festival, overall smartphone sales in China declined nearly 15% compared to the same period last year, reflecting short-term weakness in demand.

2 hours ago