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 85% 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. 85,000.

The gold’s value is assessed based on the specific purity of the pledged gold (usually 18-22 karats), its weight, and the gold market price. We use the lower of two rates: the average closing price for that purity over the last 30 days, or the previous day's closing price. These come from trusted sources like IBJA or SEBI-regulated exchanges. If exact purity rates aren't listed, we take the nearest available rate and adjust your gold's weight proportionally. Only pure gold content is considered—stones, gems or other embellishments get excluded in India. Your final loan amount depends on this 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: 40 grams
• Purity: 22 Karat
• Gold price:

1. Average closing price over last 30 days for 22 karat: ₹11,300 per gram
2. Previous day's closing price for 22 karat: ₹11,700 per gram

• Total gold value = 40 gm × Rs. 11,300 (considered lower of average closing price of past 30 days or closing price of that specific purity on the preceding days) = Rs. 4,52,000
• Loan offered: 40 gm× Rs. 9040 (considered as new LTV slab) =Rs. 3,61,600 (priciple + interest amount )as per new LTV slab  
• Total interest amount = Rs. 69987 (principle amount RS. 2,91,613 × if considered 24% interest rate / 100)
• Loan amount: Rs. 3,61,600 (principle amount Rs.2,91,613 + interest amount Rs. 69,987)
• LTV Ratio = (Rs. 3,61,600 / Rs. 4,52,000) × 100 = 85% 

This means the lender is offering 85% 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.

Please Note: The considered loan amount includes both the principle and the interest amount

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 85%, ensuring lenders maintain a buffer against price volatility.
• Type of borrower: Lenders may assess the borrower’s credit profile and financial stability. 
• Loan tenure: Offering short/medium term loans to individuals.
• Gold loan product type: Different loan products, such as 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!