Gold lending rules have been relaxed by the Indian central bank the Reserve Bank of India (RBI).
The RBI has made the move in an attempt to "facilitate monetisation of idle gold", as much of the country's stocks of the precious metal is currently tied up in jewellery.
It was announced by the bank that firms will now be able to lend up to 75 per cent of the value of gold jewellery that is deposited with them as collateral.
Non-banking financial companies (NBFCs) may now be encouraged to step up their trading of the precious metal, which in turn could have an impact on the price of gold worldwide.
The RBI said: "In view of the moderation in the growth of gold loan portfolios of NBFCs in the recent past, and also taking into consideration the experience so far, it has been decided to raise the LTV ratio to up to 75 per cent for loans against the collateral of gold jewellery from the present limit of 60 per cent with immediate effect."
Gold has been down for the last two days in a row in London as a result of fears over US data that is set to be released later in the week.
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