Coop banks can double gold loan under bullet repayment: RBI

The Reserve Bank today doubled to Rs 2 lakh the amount of loan furnished by cooperative banks under the Gold Loan Bullet Repayment scheme. Earlier, all state and central cooperative banks were permitted to grant gold loans up to Rs 1 lakh with bullet repayment option.

"On a review, it has been decided to increase the quantum of loan that could be granted under the scheme, from Rs 1 lakh to Rs 2 lakh subject to conditions," RBI said in a notification.

The period of the loan shall not exceed 12 months from the date of sanction. Under the bullet repayment scheme, the banks need to maintain loan to value ratio of 75 percent on the loan amount including the interest. However, if it is not maintained the loan would be treated as a non-performing asset (NPA), RBI added.

Also, the interest will be charged to the account on monthly basis but will become due for payment along with principal only at the end of 12 months from the date of sanction, it said. State and central co-operative banks grant loans for various purposes against the security of gold/gold ornaments as part of their lending policy.