Gold Loan Stocks Zoom 7% As RBI Proposes Hiking LTV Limit To 85% For Small Loans

Last Updated:June 06, 2025, 14:42 IST

Governor Malhotra indicates the loan-to-value (LTV) ratio for gold loans under Rs 2.5 lakh will be increased to 85% (from earlier 75%).

Gold Stocks: Gold loan stocks saw significant buying on Friday, June 6 following an announcement by RBI Governor Sanjay Malhotra, stating that the loan-to-value (LTV) ratio for gold loans under Rs 2.5 lakh increasing to 85 percent from the previous 75 percent, providing NBFCs with more lending flexibility. This development spurred a surge in the stocks of gold financing companies such as Muthoot Finance, Manappuram Finance, and IIFL Finance, with their shares rising between 2 to 7 percent.

LTV (Loan-to-Value) ratio means how much loan you can get against the value of your gold.

The new regulations mark a positive change from earlier draft guidelines that proposed capping the LTV at a uniform 75 percent for both banks and NBFCs. With the updated LTV ratio, NBFCs can now offer larger loans against the same gold collateral. This is expected to drive higher loan disbursements, attract more borrowers, and enhance earnings growth for gold financiers.

Muthoot Finance shares jumped 7 per cent intraday to trade at Rs 2450.40 apiece, against the previous day close at Rs 2,294.60. Similarly, Manappuram Finance shares gained 5+ per cent to reach Rs 248.46 compared to the day’s opening at Rs 234.84 apiece.

Simplified Operational Norms 

Governor Malhotra also noted that small-ticket gold loans will not require credit appraisal, and end-use monitoring will only be necessary for loans under the Priority Sector Lending (PSL) category. These simplified operational norms are aimed at reducing paperwork, speeding up loan processing, and easing the compliance burden on lenders.

Final Guidelines To Be Released Soon

Addressing the draft norms, Malhotra mentioned that there was nothing new in them but emphasized the consolidation of existing regulations. “We observed that some regulated entities were not adhering to norms due to a lack of clarity. Therefore, we have consolidated the regulations and will release the final guidelines today or by Monday morning,” he said.

RBI announced to cut the repo rate by 50 bps to 5.50 per cent from 6 per cent in the latest MPC meet.

Varun Yadav

Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst…Read More

Varun Yadav is a Sub Editor at News18 Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst… Read More

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