Last updated 12 Nov 2026
Loan-to-value (LTV) is the loan as a share of the value of the gold you pledge. For consumption gold loans the Reserve Bank of India caps it at 85% for loans up to ₹2.5 lakh, 80% for loans above ₹2.5 lakh and up to ₹5 lakh, and 75% for loans above ₹5 lakh. A lender may offer less. Your limit also depends on the gold's purity and weight, since only the pure gold content is valued.
This guide shows how the limit is worked out, how the three tiers apply, and what happens if the gold price falls during the loan. The tiers come from the RBI's Lending Against Gold and Silver Collateral Directions, 2025, which we read on 8 November 2026. Check the current text, since rules can change. For the full loan process, see the gold loan guide.
What LTV means
LTV is a safety margin. A lender will not lend the full value of the gold, because the gold price can fall. The gap between the loan and the value is its cushion. A lower LTV gives the lender more cushion and you a smaller loan. A higher LTV gives you more money and the lender less protection, so the RBI sets a ceiling.
The RBI ceilings
Maximum LTV for consumption gold loans (RBI Directions, 2025)
| Total consumption loan per borrower | Maximum LTV |
|---|---|
| Up to ₹2.5 lakh | 85% |
| Above ₹2.5 lakh and up to ₹5 lakh | 80% |
| Above ₹5 lakh | 75% |
The ratio must be maintained throughout the loan, not only at the start. For a loan repaid in one payment at the end (a bullet loan), the lender works out the ratio on the total amount payable at maturity, which includes interest. This means that interest building up over the term uses part of your cushion. The tiers apply to loans taken for consumption. Business and agricultural loans can follow other rules, so ask the lender which apply to you.
How your limit is worked out
- The lender tests the purity of your gold and weighs it.
- It leaves out stones, enamel and other non-gold parts.
- It calculates the pure gold content and values it at the reference price the Directions require, based on recent closing prices for that purity.
- It applies the LTV share that fits the loan size, or a lower one by its own policy.
- It subtracts any fees it deducts upfront to show what reaches your account.
The valuation is the lender's own, so two lenders can value the same gold differently. Ask each to show the weight, purity and rate it used.
Worked examples
Example 1: your gold is valued at ₹2,50,000. At the 85% tier, the most the lender could lend is ₹2,12,500, which is under ₹2.5 lakh, so the 85% tier fits. Example 2: your gold is valued at ₹6,00,000. At the 80% tier the limit would be ₹4,80,000, which sits in the 80% band. Example 3: your gold is valued at ₹10,00,000. At 75%, the limit would be ₹7,50,000, in the 75% band. Always check which tier fits the loan you actually request, and ask the lender how it applies the tiers near the boundaries.
Illustrative limits (lenders may offer less)
| Gold value | LTV used | Highest possible loan |
|---|---|---|
| ₹2,50,000 | 85% | ₹2,12,500 |
| ₹6,00,000 | 80% | ₹4,80,000 |
| ₹10,00,000 | 75% | ₹7,50,000 |
Why the lender looks at pure gold, not the weight on the scale
Jewellery is rarely pure gold. A ring marked as a lower purity contains other metals to make it harder and cheaper. Stones, enamel and decorative parts add to the weight on the scale but not to the value the lender will lend against. If your piece weighs 20 grams and the lender finds that only part of it is pure gold, the loan is worked out on the pure-gold part alone. This is why a heavy but low-purity or stone-studded piece can fetch less than you expect, and why two lenders can give different figures for the same item if their testing differs. Ask to see the test result, and ask whether the lender will re-test in front of you if you doubt it.
It also helps to know that valuations move with the gold price the lender uses on the day. The rate is not the shop price you see for new jewellery, since that includes making charges and tax. Ask which rate the lender uses and how often it updates it, because it affects both your limit and the margin that protects you later.
What happens if the gold price falls
Because LTV must be maintained, a fall in the gold price can push your loan above the allowed share. The lender may then ask you to pay part of the loan, add more gold or other security, or take other steps set out in the agreement. Read that clause before you sign. A loan taken at the maximum LTV leaves the least room for a fall. Borrowing less than the maximum gives you more protection.
Worked example: you borrow ₹2,00,000 against gold valued at ₹2,50,000. If the gold price falls and the same gold is later valued at ₹2,20,000, the loan is a larger share of the value, and the lender may ask you to repay part or add security. Had you borrowed ₹1,60,000, you would have had more room.
How to keep a safe margin
- Borrow less than the maximum if you can.
- Ask the lender when it checks the LTV and how it will tell you if a call is made.
- Know your contact details are right so you receive messages.
- Repay part of the loan if prices fall sharply and you can afford it.
- Watch the due date of a bullet loan, since interest increases the amount payable.
Frequently asked questions
Is the LTV the same for every lender?
The RBI sets the maximum for regulated lenders. Each lender can set a lower one. The ceilings are 85%, 80% and 75% by loan amount for consumption loans.
Does the LTV apply to business gold loans?
The tiers above apply to consumption loans. Business and agricultural loans may follow other rules. Ask the lender which apply.
Why is my loan less than the market value of my gold?
Because of the LTV margin and because only the pure gold content is valued. Stones and other parts are left out, and fees may be deducted upfront.
What if my gold is of low purity?
The lender values what it tests. Lower purity means lower pure gold content, so a lower loan.
Can the lender ask for more money if the gold price falls?
The LTV must be maintained throughout the loan, so the lender may ask you to repay part or add security. Read the clause in your agreement.
Do I get the full loan amount in my account?
Not always. Fees deducted upfront reduce the amount you receive. Ask for the net amount and the Key Fact Statement.
Related reading: Gold loan, Gold loan guide, Gold loan foreclosure, Gold loan repayment options, Gold loan for business, Agricultural gold loan, Glossary: LTV, EMI calculator.
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