The Reserve Bank of India (RBI) has increased the monetary ceiling of gold loans under Bullet Repayment Scheme from 2 lakh rupees to 4 lakh rupees for Urban Co-operative Banks.
- This will remove difficulties faced by the Urban Co-operative Banks and help in meeting the prescribed Priority Sector Lending target.
- RBI permitted bullet repayment of gold loans up to ₹1 lakh to start with (in 2007), which was increased later (in 2014) to ₹2 lakh, with the repayment being restricted to 12 months.
- UCBs are allowed to extend gold loans under the Bullet Repayment and Equated Monthly Instalment (EMI) Repayment routes for 12 months.
- Under bullet repayment, the principal and interest on a loan are paid in lumpsum by the borrower to the lender at the end of the loan tenure.
- Under EMI, a fixed amount of payment (includes principal and interest components) is made by the borrower to the lender on a specified date each month.
