Skip to main content

Guidelines on Bullet Repayment of Gold Loans of UCBs

Reserve Bank of India (RBI) has revised the guidelines on bullet repayment of gold loans sanctioned by Primary (Urban) Co-operative Banks (UCBs).

What is bullet repayment?

The loans with bullet repayment option are the once where the interest is charged to the account on monthly basis, however, the entire outstanding amount (i.e. principal + interest) is repaid in one lump sum at the end of the loan tenure. 

What were the previous instructions on bullet repayment of gold loans?

Reserve Bank of India (RBI) had, in November 2007, permitted bullet repayment of gold loans sanctioned by Primary (Urban) Co-operative Banks (UCBs) subject to the following guidelines –

  • The amount of gold loan sanctioned should not exceed ₹1 lakh at any point of time.
  • The period of the loan shall not exceed 12 months from the date of sanction.
  • Interest shall be charged to the account at monthly rests but shall become due for payment along with principal only at the end of 12 months from the date of sanction.
  • The bank should prescribe a minimum margin to be maintained in case of such loans and accordingly, fix the loan limit taking into account the market value of the security (gold / gold ornaments), expected price fluctuations, interest that will accrue during the tenure of the loan etc.
  • Such loans shall be governed by the income recognition, asset classification and provisioning norms which shall be applicable once the principal and interest become overdue.
  • The account should be classified as Non Performing Asset (NPA) (sub-standard category) even before the due date of repayment, if the prescribed margin is not maintained.

The limit for gold loans with bullet repayment options was increased in October 2014 from ₹1 lakh to ₹2 lakh subject to the following guidelines –

  • The period of the loan shall not exceed 12 months from the date of sanction.
  • Interest shall be charged to the account at monthly rests but shall become due for payment along with principal only at the end of 12 months from the date of sanction.  
  • Banks should maintain a Loan to Value (LTV) ratio of 75% on the outstanding amount of loan including the interest on an ongoing basis, failing which the loan shall be treated as NPA.
  • Gold jewellery accepted as security / collateral shall be valued at the average of the closing price of 22 carat gold for the preceding 30 days as quoted by the India Bullion and Jewellers Association Ltd. If the gold is of purity less than 22 carats, the bank should translate the collateral into 22 carat and value the exact grams of the collateral. 

What are the revised instructions on bullet repayment of gold loans?

RBI has now increased the monetary ceiling of gold loans that can be granted under the bullet repayment scheme, from ₹2 lakh to ₹4 lakh for those UCBs who have met the overall Priority Sector Lending (PSL) target and sub targets as on March 31, 2023 and continue to meet the targets and sub-targets.


References

Reserve Bank of India. (2007, November 26). ”Gold Loan Payment-UCBs". Retrieved from https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=3955&Mode=0

Reserve Bank of India. (2014, May 09). 'Advance against Pledge of Gold/ Silver Ornaments'. Retrieved from https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8873&Mode=0

Reserve Bank of India. (2014, October 30). 'Gold Loan – Bullet Repayment - UCBs'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=9307&Mode=0

Reserve Bank of India. (2023, October 06). 'Gold Loan – Bullet Repayment – Primary (Urban) Co-operative Banks (UCBs)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12542&Mode=0


Follow at - Telegram   Instagram   LinkedIn   Twitter   Facebook

Labels:

Comments

Post a Comment

Popular Posts

National Strategy for Financial Inclusion (NSFI) 2025-30

Reserve Bank of India (RBI) has published National Strategy for Financial Inclusion (NSFI) 2025-30. Financial Inclusion The Committee on Financial Inclusion (Chairman: Dr C Rangarajan, RBI, 2008) defined financial inclusion as “the process of ensuring access to financial services, timely and adequate credit for vulnerable groups such as weaker sections and low-income groups at an affordable cost”. The Committee on Medium-Term Path to Financial Inclusion (Chairman: Shri Deepak Mohanty, RBI, 2015) viewed financial inclusion as, “convenient access to a basket of basic formal financial products and services that should include savings, remittance, credit, government-supported insurance and pension products to small and marginal farmers and low income households at reasonable cost with adequate protection progressively supplemented by social cash transfers, besides increasing the access of small and marginal enterprises to formal finance with a greater reliance on technology to cut costs an...
Post a Comment
Read more

RBI’s Monetary Policy (December 05, 2025): In A Nutshell

The bi-monthly monetary policy of Reserve Bank of India (RBI) was announced on December 05, 2025. Here are some of the highlights of the monetary policy announcement. Rates   Change Rate Policy repo rate Reduced by 25 bps 5.25% Standing deposit facility (SDF) rate 5.00% Marginal standing facility (MSF) rate 5.50% Bank rate 5.50% Monetary policy stance Monetary policy stance unchanged as ‘neutral’. Domestic Economy  Real Gross Domestic Product (GDP) growth accelerated to 8.2% in Q2, buoyed by strong spending during the festive season which was further facilitated by the rationalisation of the goods and services tax (GST) rates.  Real GDP growth for 2025-26 is projected at 7.3%. For the first time since the adoption of flexible inflation targeting (FIT), average headline inflation for a quarter at 1.7% in Q2, breached the lower tolerance threshold (2%) of the inflation target (4%). It dipped further to an all-time low of 0.3% in October 2025. The underlying inflation pressu...
Post a Comment
Read more

Export / Import of Currency and Possession / Retention of Foreign Currency

Reserve Bank of India (RBI) has updated the guidelines on export and import of currency. What are the guidelines on export and import of Indian currency? Transferor Transfer from Transfer to Nature of currency Maximum limit Person resident in India India Countries other than Nepal and Bhutan Currency notes of Government of India (GoI) and RBI notes ₹25000 per person Commemorative coins 2 coins Person resident in India gone out of India on temporary visit, on his return Countries other than Nepal and Bhutan India Currency notes of GoI and RBI notes ₹25000 per person Person resident outside India (not citizen of Pakistan / Bangladesh) visiting India India Any country Currency notes of GoI and RBI notes ₹25000 per person Any country India Person (not citizen of Pakist...
Post a Comment
Read more

Rupee Interest Rate Derivatives

Reserve Bank of India (RBI) has issued directions on rupee interest rate derivatives. What is Interest Rate Derivative (IRD)? Interest Rate Derivative (IRD) means a financial derivative contract whose value is derived from one or more Rupee interest rates, prices of Rupee interest rate instruments, or Rupee interest rate indices. To which transactions shall the directions be applicable? The directions shall be applicable to Rupee IRD transactions undertaken in the over-the-counter (OTC) market and on recognised stock exchanges in India. Forward Contracts in Government Securities shall be undertaken in the OTC market in terms of the Reserve Bank of India (Forward Contracts in Government Securities) Directions, 2025, dated February 21, 2025. Who are eligible participants in IRD markets? Resident Non-resident, through its central treasury or its group entity, where applicable.  What are the directions on trading of IRDs on recognised stock exchanges? A recognised stock exchange is per...
Post a Comment
Read more

What are Government Securities (G-Secs)?

Governments raise / borrow funds by issuing government securities to finance a variety of projects and activities. What is Government Security (G-Sec)? Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments.  G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments. What are the tenures of G-Secs? G-Secs can be short-term securities (with original maturities of less than 1 year) or long-term securities (with original maturity of 1 year or more).  In India, the Central Government issues both short-term and long-term securities while the State Governments issue only long-term securities. What are the types of G-Secs? Government security Term Issued by Treasury Bills (T-bills) Short-term Central Government Cash Management Bills (CMBs) Short-term Central Government Bonds or Dated G-Secs ...
Post a Comment
Read more