Happy hours: RRB gold loan limit doubled; no more debit card charges on government payments

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Published: February 16, 2017 6:16:06 PM

The Reserve Bank of India on Thursday doubled the limit on borrowing gold loans from RRBs (regional rural banks) against bullet repayment option to Rs 2 lakh. It further specified that the maximum tenure of such loans would be fixed at 12 months from the date of sanction.

On gold loans taken from RRBs, interest will be charged on a monthly basis on the total outstanding, but will become due for payment along with principal only at the end of 12 months from the date of sanction. (Image: Reuters)On gold loans taken from RRBs, interest will be charged on a monthly basis on the total outstanding, but will become due for payment along with principal only at the end of 12 months from the date of sanction. (Image: Reuters)

The Reserve Bank of India on Thursday doubled the limit on borrowing gold loans from RRBs (regional rural banks) against bullet repayment option to Rs 2 lakh. It further specified that the maximum tenure of such loans would be fixed at 12 months from the date of sanction.

Under the scheme, while interest will be charged on a monthly basis on the total outstanding, it will become due for payment along with principal only at the end of 12 months from the date of sanction, RBI said in a notification.

RBI has mandated that the RRBs must maintain a loan-to-value (LTV) ratio at 75% on the outstanding amount of loan including the interest on an ongoing basis, failing which the loan will be treated as an NPA (non-performing asset).

LTV ratio is the proportion of the amount of money that can be borrowed against the value of the gold tendered as the security.

Debit-to-credit

In a separate issue, in an effort to boost cashless payments, RBI also said the government has decided to absorb the merchant discount rate charges on debit card transactions done for making payments to the GoI (government of India). “In order to operationalise the above, RBI will reimburse banks the MDR on debit cards used for payment of tax and non-tax dues to the Government of India with effect from January 1, 2017,” RBI said in a notification.

Merchant discount rate is the charge that the banks levy on the merchants for facilitating card transactions. At present, the MDR is at 0.25% for debit card transactions up to Rs 1,000; 0.5% up to Rs 2,000; and 1% above Rs 2,000.

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Prime Minister Narendra Modi has been pushing for an increasingly cashless economy, ostensibly to stem the use of unaccounted wealth and keep a better record so as to eventually increase the tax base. It has been promoting more and more digital transactions, following the surprise demonetisation of high-value currency notes on November 8.

The government has ever since announced incentives on using digital wallets in forms of cash-back on making payments for various utilities such as petrol and daily dairy supplies.

Indian government has also built India Stack – a set of open APIs contributing towards a digital infrastructure to facilitate cashless and paperless delivery of services through electronic verification, data transfers, digital lockers and more. India stack has drawn praise as being a cutting-edge system from Microsoft’s Bill Gates and Google’s Sundar Pichai.

 

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