Mumbai: The Reserve Bank of India has relaxed the Rs 1-lakh ceiling on loans for nonagricultural purposes against pledged gold and has left it to individual banks to decide on a lending cap.

“Banks, as per their board-approved policy, may decide upon the ceiling with regard to the quantum of loans that may be granted against the pledge of gold jewellery and ornaments for nonagricultural end uses,” RBI said in a circular, responding to representations from them. RBI retained the loan-tovalue ratio at 75% of the value of gold and the tenor of the loan to one year.

RBI had limited lending against pledged gold to Rs 1 lakh in December 2013 and a month later, capped the loan-to-value ratio at 75%. RBI clarified that interest will be charged to the account at monthly rests and may be recognised on accrual basis provided the account is classified as a ‘standard’ account. This will also apply to existing loans, it said.