Mumbai: The Reserve Bank of India (RBI) has tightened rules for finance companies which lend against gold, a fast-growing business in the country, in line with the recommendations of an internal panel.
The RBI said lenders need to value the pledged gold at the average closing price of 22-carat gold for the preceding 30 days as quoted by the Bombay Bullion Association Ltd, to arrive at the loan-to-value ratio.
The ratio would remain at 60 percent for loans against jewellery.
"Currently, there is no standard method for arriving at the value of gold accepted as collateral and valuation is arbitrary and opaque," the central bank said in a notification issued late on Monday.
Shares of gold-based lenders slumped, with Muthoot Finance Ltd falling 6.4 percent and Manappuram Finance Ltd down 3.7 percent on Tuesday.
The central bank also streamlined the process by which lenders auction gold when a borrower defaults, saying lenders need to declare a reserve price for the pledged ornaments.