LTV Ratio for Gold Loan

NBFCs like Bajaj Finance determine the Loan-to-Value (LTV) ratio for gold loans based on guidelines issued by the Reserve Bank of India (RBI). As per current RBI regulations, the maximum LTV ratio allowed is up to 75% of the gold’s market value. This means if your gold is valued at Rs. 1,00,000, you may get a loan of up to Rs. 75,000.

The gold’s value is assessed based on its purity (usually 18-22 karats), weight, and the prevailing gold market price. Only the actual gold content is considered, stones and other embellishments are excluded. The final loan amount depends on this calculated value and the applicable gold loan LTV ratio.

NBFCs like Bajaj Finance ensure transparency in gold valuation and follow a standardised process. This helps borrowers know exactly how much gold loan they can get. The LTV ratio also helps maintain a balance between borrower benefit and lender risk, ensuring responsible lending practices.

Pro tip: Check your gold loan eligibility and leverage the value of your gold based on latest gold rates.

The Loan-to-Value (LTV) ratio is an essential metric in determining how much loan you can get against your gold. This helps both borrowers and lenders assess the maximum eligible loan amount.

To calculate the gold loan to value ratio, follow these steps:

1. Determine the market value of the gold jewellery based on:

• Net weight of the gold (in grams)
• Purity level (for example, 22 Karat)
• Current market price of gold per gram

2. Use the formula:
LTV Ratio (%) = (Loan Amount / Market Value of Gold) × 100

      Sample calculation:

• Weight of gold pledged: 50 grams
• Purity: 22 Karat
• Market price: Rs. 5,000 per gram
• Total gold value = 50 × Rs. 5,000 = Rs. 2,50,000
• Loan offered: Rs. 1,87,500
• LTV Ratio = (Rs. 1,87,500 / Rs. 2,50,000) × 100 = 75%

This means the lender is offering 75% of the gold’s value as a loan, which is a common industry standard. You can also use our gold loan calculator for instant estimates for your loan.

Several factors influence the LTV ratio in gold loans:
 

• Gold purity: Higher purity gold, such as 22-karat or 24-karat, typically allows for a higher loan-to-value (LTV) ratio, as it has a greater intrinsic value.
• Market price of gold: Fluctuations in the market price of gold directly impact the LTV ratio. Higher gold prices may increase the amount lenders are willing to offer.
• Lender’s policy: Different lenders have varying LTV policies based on risk appetite. Some may cap the LTV ratio lower to minimise risk exposure.
• Regulatory limits: The Reserve Bank of India (RBI) caps the maximum LTV ratio for gold loans, generally around 75%, ensuring lenders maintain a buffer against price volatility.
• Type of borrower: Lenders may assess the borrower’s credit profile and financial stability, potentially adjusting the LTV ratio based on creditworthiness.
• Loan tenure: Shorter loan tenures may allow for a higher LTV ratio, as lenders face less risk over a shorter period.
• Gold loan product type: Different loan products, such as overdraft or term loans, may have varying LTV ratios based on structure and repayment terms.
• Demand for gold loans: High demand for gold loans in certain regions or periods can influence the LTV ratio as lenders adjust terms to stay competitive.

Quick fix: Do not let your jewellery sit idle—tap into its value with a gold loan that suits your needs. Apply for a gold loan today!