In a major relief, the Reserve Bank of India has relaxed the limit of loan that banks can sanction against the pledging of gold ornaments and jewellery, and where the end use of the loan is not for agricultural purposes.

The move is expected to protect the interest of the customers who can continue to opt for gold loans based on merits of the case, rather than rely on the loan to value ratio. The RBI has however retained the loan to value ratio at 75% of the value of gold.

With many individuals pledging household gold ornaments to avail of personal loans, the aim is also to smoke out gold lying within homes and bank lockers across the country, said analysts.