The RBI on Monday permitted urban cooperative banks (UCBs) to sanction loan of up to Rs 1 lakh against gold with “bullet repayment” option. “Interest will be charged to the account at monthly basis but will become due for payment along with the principle only at the end of 12 months from the date of sanction,” the RBI said in a notification. The notification assumes significance in view of the rising gold prices, which is hovering above Rs 10,000 per ten gram mark. The RBI has asked the UCBs to lay down policies for sanction of loan with the bullet repayment option. The UCBs would need to maintain a minimum margin in case of such loans and fix the loan limit taking into account the market value of the security (gold/ gold ornaments), expected price fluctuations and interest.
