Fall in gold prices to trigger demand for more collateral -

Fall in gold prices to trigger demand for more collateral
Gold loan customers forced to reset or renew their loans at the new LTV
Shrikant Jadhav, promoter of a small manufacturing units at the outskirts of Mumbai, was surprised when he got a call from the bank to top up his gold loan with additional collateral or pay few instalments in advance.
Jadhav is among many businessmen who are now reworking their gold loan exposure with banks and NBFCs which marketed gold loan as panacea of all liquidity-problems till late last year.
The consistent rally in gold prices while the Covid pandemic was at its peak last year made banks and NBFCs to push gold loan to liquidity starved industries. Moved by the safe-haven factor, the RBI in August increased the LTV (loan-to-value) ratio on gold loans to 90 per cent from 75 per cent.

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