What is the 'Bullet' repayment scheme on which RBI made a big announcement? What is the connection with gold loan?

Under the Bullet Repayment Scheme, the borrower pays the principal amount and interest in a lump sum at the end of the loan tenure. Although the interest on loan against gold is calculated every month throughout the tenure, the principal amount and interest have to be paid in one go.

The Reserve Bank of India has increased the existing limit of gold loan under the Bullet Repayment Scheme. In some urban co-operative banks it has been increased from Rs 2 lakh to Rs 4 lakh. RBI Governor Shaktikanta Das made this announcement while announcing the results of the policy meeting on Friday. RBI Governor said that in respect of Urban Co-operative Banks (UCBs), it has been decided to increase the existing limit of gold loan from Rs 2 lakh to Rs 4 lakh under the Bullet Repayment Scheme. Who have completed the overall target and sub-target under primary sector lending by March 31, 2023.

Gold loan limit under Bullet Payment Scheme

Under the Bullet Repayment Scheme, the borrower pays the principal amount and interest in a lump sum at the end of the loan tenure. Although the interest on loan against gold is calculated every month throughout the tenure, the principal amount and interest have to be paid in one go. That is why it is known as bullet repayment.

According to experts, under the Bullet Repayment Scheme, banks have to maintain a loan to price ratio of 75 percent on the loan amount including interest. The central bank had said in a circular in 2017 that interest would be calculated on a monthly basis, but payment would be taken along with the principal amount at the end of 12 months from the date of approval. The tenure of the loan will not exceed 12 months from the date of sanction. State and central co-operative banks offer loans against the security of gold/gold jewelery for various purposes as part of their lending policies.

RBI did not change the policy rate

RBI MPC has not made any change in the policy rate for the fourth consecutive time in the October cycle. At present the RBI repo rate is 6.5 percent. By the way, RBI has increased the inflation estimate for the second quarter of the current financial year. On the other hand, the inflation estimate for the third quarter has been reduced marginally. The inflation estimate for the entire financial year has been made at 5.4 percent. On the economy front, RBI has not made any changes in economic growth. The country's GDP growth in the current financial year has been kept at 6.5 percent. Whereas the growth in the first quarter of the next financial year has been kept at 6.6 percent.