The Reserve Bank of India (RBI) has taken a significant step in the realm of gold loans, benefiting Primary (Urban) Co-operative Banks (UCBs). In a recent circular dated October 6, 2023, the RBI has doubled the gold loan ceiling to ₹4.00 lakh for compliant UCBs. This development comes as part of RBI’s ongoing efforts to support and incentivize banks meeting Priority Sector Lending (PSL) targets. Let’s delve deeper into this announcement and its implications.
Background Information: To understand this decision, it’s essential to look back at earlier RBI circulars. In 2014, UCBs were allowed to offer gold loans with a bullet repayment option of up to ₹2.00 lakh, subject to specific conditions. This was a significant boost for UCBs looking to diversify their lending portfolios.
PSL Incentives: The RBI, in its circular dated June 8, 2023, had hinted at the possibility of incentives for UCBs that met the PSL targets. The recent announcement aligns with this commitment. UCBs that have met the overall PSL target and sub-targets as of March 31, 2023, and continue to meet them will now be able to provide gold loans up to ₹4.00 lakh under the bullet repayment scheme.
Effective Date: The enhanced gold loan limits are effective immediately from the date of the circular, which is October 6, 2023. This means that compliant UCBs can start offering higher-value gold loans to their customers right away.
Unchanged Provisions: It’s worth noting that while the loan ceiling has been increased, all other provisions from the previous circulars, including the conditions and regulations, remain unchanged. Compliant UCBs are expected to continue adhering to these guidelines.
Conclusion: The RBI’s decision to double the gold loan ceiling to ₹4.00 lakh for compliant UCBs is a positive step towards encouraging urban co-operative banks to meet their Priority Sector Lending (PSL) targets. This move not only supports the financial growth of these banks but also provides customers with increased access to gold-backed financing options. As we move forward, it will be interesting to see how UCBs leverage this opportunity to expand their lending activities and cater to the diverse financial needs of their clients.
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Reserve Bank of India
RBI/2023-24/66
DOR.CRE.REC.42/07.10.002/2023-24
October 6, 2023
Primary (Urban) Co-operative Banks other than Salary Earners’ Banks
Madam / Dear Sir,
Gold Loan – Bullet Repayment – Primary (Urban) Co-operative Banks (UCBs)
Please refer to the circular UBD.BPD.(PCB).Cir.No.25/13.05.001/2014-15 dated October 30, 2014, in terms of which UCBs were permitted to extend gold loans up to ₹2.00 lakh with bullet repayment option, subject to certain conditions.
2. Reference is also invited to para 5 of our circular DOR.CRE.REC.18/07.10.002/2023-24 dated June 8, 2023 wherein it is stated that incentives to UCBs meeting the Priority Sector Lending (PSL) targets shall be announced separately. Accordingly, as announced vide para 3 of Statement on Developmental and Regulatory Policies dated October 6, 2023, it has been decided to increase the monetary ceiling of gold loans that can be granted under the bullet repayment scheme, from ₹2.00 lakh to ₹4.00 lakh for those UCBs who have met the overall PSL target and sub targets as on March 31, 2023 and continue to meet the targets and sub-targets as prescribed at para 2 of our circular dated June 8, 2023, ibid.
3. The limits prescribed above are effective from the date of this circular. All other provisions of the aforesaid circulars remain unchanged.
Yours faithfully,
(Manoranjan Mishra)
Chief General Manager
