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ICICI Securities Report
The regulator yesterday relaxed the permissible loan to (LTV) on non-agri gold loans sanctioned by banks to 90% (from 75%) till March 31, 2021 with the specific objective of facilitating borrowers to tide over the temporary liquidity gap due to Covid-19 stress.
This is quite unlike the Reserve Bank of India - that the LTV has been surprisingly relaxed upwards, especially when the collateral , i.e. gold prices, have rallied sharply in recent months.
We believe easing financial stress and providing a stopgap arrangement (liquidity against gold) to the stressed borrower has taken precedence over prudence this time.
However, several specifications in the notification are raising apprehensions that we want to address to the best of our assessment.
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